A Cash Individual Savings Account (ISA) is very similar to a typical savings account… however the interest is NOT TAXED! For the tax year 2011/2012 (April to April), it is possible to invest £5,340 into a cash ISA. Remember, investing as early as possible provides your savings with a bigger opportunity to maximise tax free interest. It is possible to open a cash ISA from the age 16 and your cash can be easily accessed as and when you please.
Contributing yearly to your ISA will see your savings continue to grow, with the key benefit of tax free interest. In similar fashion to typical savings accounts, there are a variety of cash ISA options available including fixed rate and instant access.
Compared to a Stocks and Shares ISA, a cash ISA is more suited to you if you wish to be certain that you will receive your capital back. A cash ISA is generally viewed as a way to save tax efficicently for the short term, while Stocks and Shares ISAs are viewed as tax wrappers more suited to medium and long term investment.
Summary of Cash ISA
- Invest up to £5,340 per tax year and exemption from tax on interest accrued.
- Secure and easy to access your savings. Quite similar to a normal savings account.
- Typically suited to a short term investment outlook, for example saving for a holiday.