An ISA (Individual Savings Account) is a very good way to save money, mainly because they offer ISA account holders the opportunity to accrue tax-free interest on their savings.
Those opening an ISA for the first time are likely to have some questions about how ISAs work. To make things a little clearer, here are a few of the most important facts you need to know about ISAs.
- You’re only allowed one cash ISA. However, you are also allowed a stocks and shares ISA.
- There is a limit to how much you can save in an ISA each year. Each year, a new limit is set for how much you can save in your ISA account. This year, the cash ISA limit is £5,640. However, the total allowance you can split between a cash ISA and a stocks and shares ISA for this year is £10,200.
- If you don’t use up your ISA allowance within the tax year, you lose it. You have until April 5th at the end of the tax year to fill up your ISA account to meet your full allowance or you lose the allowance. You can’t carry it over to the next year, when the next year’s allowance kicks in.
- With a fixed rate cash ISA you can’t withdraw your money without incurring penalties. You generally get a higher interest rate fixed for a set period of time when you take out a fixed rate cash ISA, but you may not be able to withdraw money from your account without incurring a fee or a proportion of your interest.
Do any of you use an ISA account? What Are your thoughts?
Latest posts by Sean Bryant (see all)
- Plan in your 20s and Benefit in Retirement - September 23, 2016
- Save Money by Shopping the Seasonal Sales - September 19, 2016
- 4 Personal Finance Lessons You Must Learn Before you are 21 - September 13, 2016