How to Find the Best Cash ISA
The acronym ISA stands for Individual Savings Account. These are savings products available to any UK citizen that enable the individual to invest limited amounts of capital without incurring any tax on the interest accrued on the investment. There are two types of ISA: Stocks and Shares, and Cash. A Cash ISA allows the individual to invest £5,100 in the 2010/2011 tax year. This allowance will rise in line with inflation from 2011. Many financial institutions offer Cash ISA products with different benefits and interest rates.
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Instructions
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Analyze the terms and conditions of many different Cash ISA providers prior to the start of the tax year, which is April 6th or the nearest business day thereafter. To get the best return from your Cash ISA, you should try to invest as close to the start of the tax year as possible.
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Consider your personal circumstances and the likelihood that you may need to access the money in your Cash ISA. Generally, financial services providers offer better or fixed interest rates the longer you are prepared to lock away your capital. If you choose a longer term ISA and need to withdraw your money before the completion date, you are often liable for a fee and loss of interest.
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Compare similar products with each other, for example easy-access ISAs or fixed-rate ISAs. Newspapers often carry details of Cash ISA rates, as do comparison websites such as Which?, The Motley Fool and Money Saving Expert.
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Review your Cash ISA at the end of each tax year. Financial institutions may offer impressive interest rates in order to attract investors, then drop their rates in subsequent years. Ensure that you inform your Cash ISA provider of any changes in contact details as they are required to send you interest rate updates at the start of each tax year.
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Tips & Warnings
Exercise caution with regards to locking your money away for a long period of time. Financial services providers determine their own interest rates and national interest rates could exceed your ISA rate during the term of your agreement.
References
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