Introducing Cash ISAs
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ISA stands for Individual Saving Account and they are available for United Kingdom residents only. However, people working under the British government but residing in foreign countries can also access this type of savings account. Restrictions with ISAs are that you can not invest more than £7000 in a financial year.
You can opt for an ISA with cash a component or one with a stock or share component. With an ISA, which replaced TESSAs and PEPs, you don’t have to pay tax. If you are above 18 years of age, then you can invest in both - cash ISA as well as stock and share ISAs. However, people in the age group of 16-18 can invest in cash ISAs only.
There are generally two varieties of ISA and these are the maxi ISA and mini ISA. The total amount of investment you can make in either is fixed. For example, for a mini ISA, you can make an outlay of up to £3,000 in cash each tax year. For a maxi ISA, the cash outlay limit is also £3,000 per tax year.
Cash ISAs are more beneficial than Stock and share ISAs. Withdrawals can be made easily and are more flexible than the latter. Also the risk factors involved in a cash ISA are minimal. It is free from any kind of transaction charges.
If investing in a cash ISA, you can invest in cash unit trusts, in National Savings, in Building society trusts and also make bank deposits that are authorized by UK and Europe. The cash component is preferred by people as it is easy to understand as compared to the Stock and share investment. When you invest in cash, you are guaranteed a minimum return on your investment.
However, if you invest in an ISA with a stock and share component, then the risk factor is there. You need to invest your money for a longer period of time and the withdrawals are not easily made. This type of ISA does not guarantee returns on your investment. An individual below the age of 18 can not invest in a Stock and Share ISA. The maximum amount that can be invested is £ 4000.
Another point to be noted is when you withdraw any amount from the ISA then you can not reinvest it again that tax year. For instance, you have deposited an amount of £ 3000, which is the maximum cash limit. If you withdraw £1000 from this amount, then you can not reinvest this amount again that tax year.
With a cash ISA withdrawals are paid to you within 7 days. The minimum amount that can be deposited in a Cash ISA is £10. This deposit can be made in cash, by cheque or bank transfer. The minimum interest rate paid is 1%. Overall the Cash ISA are a great way to save money at higher interest rates and without having to pay tax on your returns
click here for our UK ISA directory
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