Cash ISA

Use a standard instant access savings account, and basic-rate taxpayers have to give 20% of the interest earned straight to the Government. For higher-rate taxpayers this leaps to 40%, and for 'additional rate' taxpayers it is 50%.

Cash ISAs are simply savings accounts where the interest isn't taxed, meaning it's incredibly rare for a normal savings account to pay more interest. For example, for a cash ISA paying 6% AER to be beaten, a basic-rate taxpayer would need a savings account offering 7.5%, while anyone on the top tax bracket would need a whopping 10%.

Just like normal savings accounts there's a variety of cash ISAs available, such as instant access, fixed rate, and accounts with base rate guarantees.

Cash ISA Q & A

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tax-free ISA allowance 2012

Take advantage of your tax free ISA allowance to invest up to £5100 before April 5th 2015 in a cash ISA. (£10,200 can go into a stocks and shares ISA). A number of Cash ISAs accounts also allow you to transfer in money invested in the previous tax year, so you can maximise returns on all your tax-free savings. see our best cash isa rates.

Once you money is in a cash iSA, it remains tax-free year on year, but if you don't use a single year's allocation you lose it, you cannot carry it forward. see cash isa limit or cash isa rules