Cash ISAs

Every tax year anyone over the age of 16 may save money in a Cash Individual Savings Account. There are many easy access and instant access Cash ISAs but some banks and building societies also offer other types of Cash ISA account.

No tax is liable on the interest you earn. Any interest you earn in Cash ISAs will be paid gross - this means no tax will have been deducted. If you are a higher rate taxpayer, unlike ordinary deposit accounts, you will have no further tax to pay with your tax return.

You may save up to £3,600 every tax year in a Cash Individual Savings Account. Remember this is an absolute limit on payments into the account - so if you put £3,600 into a Cash ISA and subsequently withdraw some of it, you may not top up the account back to £3,600 because you will already have paid in as much as you are allowed!

Keep an eye on your ISA's interest rate. What tops the 'Best Buy' tables today may not be there tomorrow! You'll need to know how your interest rate is calculated and what, if any, bonuses and guarantees it involves. If you want to move existing savings in existing Cash ISAs to another ISA provider you can - but make sure you follow the rules so you don't lose the tax sheltered status of your savings.

See also:

• Cash ISAs - A Guide
• TESSA Only ISAs - A Guide

Last Updated: April 2008 © Moneyextra.com

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