Guide to cash ISAs
If you are ready to start saving, want to earn tax-free interest and enjoy easy access to your money, then a Cash ISA – or Individual Savings Account – could be for you.
A Cash ISA is simply a savings account where you don’t pay tax on the interest.
The benefit is that interest from ISAs doesn’t count towards your Personal Savings Allowance, or PSA, because it’s already tax-free. This means that by having some of your savings in a Cash ISA, you could free up your PSA to earn even more tax-free interest in other savings accounts.
Your ISAs don’t close when the tax year finishes.
This makes Cash ISAs a popular savings option because you continue to earn tax-free interest on previous years’ ISA balances as well as what you’ve invested in the current year. So you keep your savings on a tax-free basis for years ahead or as long as you have the ISA accounts.
The Government has set a limit of £20,000 on what you can invest in an ISA in the tax year 2018/19.
You can’t invest in two Cash ISAs in the same tax year but you can have more than one ISA per year – they just have to be different types. So if you wish, you can divide this annual allowance by putting money into a number of different ISA accounts each tax year.
As well as Cash ISAs you can save in Stocks and Shares ISAs. A Stocks and Shares ISA has the potential to give a better return than a Cash ISA, as it has access to a more diverse range of investments, but follows the stock market, which can go down as well as up.
Here is the range of Cash ISAs on offer from The Nottingham.
Opening a Cash ISA:
- You must be a UK resident for tax purposes.
- You must be aged 16 or over.
- You can save £20,000 in the tax year 2018/19.
- ISAs can be easy-access or fixed for an agreed period which means interest rates can vary.
- There may be a minimum deposit required to open an account.
- You can get a Junior ISA for children under 18.
- You are not allowed to open a joint ISA account.
- You can withdraw money if you need it.
- You may lose some interest if you take cash out.
Transferring savings to a different ISA:
- You can move your savings to another Cash ISA or Stocks & Shares ISA – or a Stocks and Shares ISA with another provider.
- You must transfer the whole amount if it is an account opened in the current tax year; you can’t leave any money in. But if the account was opened in previous years you aren’t obliged to move these savings, only the portion saved in the current year.
- For money saved in previous tax years, you can transfer as much as you like.
- There may be a charge, so check this won't wipe out the interest you would gain.