With ISA season in full swing, John Fitzsimons looks at what you should consider before going for your first account.
With ISA season in full swing. John Fitzsimons looks at what you should consider before going for your first account
If you want to get the best return on your savings, your best option is always to go for an ISA. The best thing about an ISA is that you don’t have to pay any tax on the interest you earn. So what do you need to consider when opening your first ISA?
Save within the limits
The ISA limits allow you to save a fair whack every year without the taxman’s involvement - £3,600 a year in a Cash ISA, unless you are over 50 in which case the limit jumps to £5,100. From April, everyone can save £5,100.
Always get the best rate
Shopping around is essential in all walks of financial life, particularly the world of ISAs. Try to get the best possible return on your savings and don’t forget about ISAs from previous tax years, as the rate on ISAs often drops after the first year.
For this reason, keep an eye on new ISAs launched that accept transfers in. If they offer a better rate than your existing ISA, and you haven’t locked your money away, then there’s nothing to stop you moving your money. But make sure you don’t withdraw your cash from the bank, or you’ll lose the tax-free wrapper around your savings. Instead, ask your new provider for an ISA transfer form.
Lock away your money
It should come as no surprise that the best rates will be on offer to those borrowers willing to lock their money away. So if you know that you won’t need the money for some time, you might prefer to go for a fixed rate Cash ISA. However, make sure that you can afford to keep your savings out of reach, as if you need to get your hands on that cash ahead of time, it will be tricky.