What To Look For When Choosing an ISA

Saturday, May 25, 2013, AM | 1 Comment

An Individual Savings Account (ISA) can help savers to deposit large sums of money and get a better return on it. The interest rate for savings accounts has decreased since the Credit Crunch. As banks are looking for ways to maximise profits, the interest rate for savings accounts has been cut substantially.

ISA’s remain an attractive option for savers, largely because of the high interest rate it offers. The money which is deposited into an ISA is tax-free but there are limits. In the 2013/14 Tax Year, £5,760 of cash can be put into an ISA. A maximum of £11,520 can be deposited in total.

There are many things to take into consideration when choosing an ISA, such as whether instant access is required.

  • Instant access

    Similar to a savings account because money can be withdrawn straight away, there are many ISA’s which offer instant access. The rate of interest for an instant access ISA is typically 1.5% but it does differ from one bank to another. As we shall see in a moment, this is a lower rate of interest than ISA’s where money can’t be withdrawn often.

    As the rate of interest for many instant access savings accounts can be as little as 0.3%, the amount of interest which is paid for an ISA is much more in comparison.

  • Higher interest rate

    There are restrictions on how often money can be withdrawn from an ISA which has a higher interest rate. A maximum of three or four times a year might be in place. Even when a withdrawal request has been submitted, it can take a couple of days before it is approved.

    However, the benefits definitely override the aforementioned. This is because a far higher rate of interest is available. As a 2.5% rate of interest is available for such ISA’s, you can get a lot more money when depositing thousands of pounds every year.

    In order to apply for an ISA, a National Insurance card should be presented to the bank which will approve it. As an ISA is tax-free, you must be able to prove your British residency. Without a National Insurance card, you cannot apply for an ISA. This is because the UK government won’t approve your application.

  • Stocks and shares

    A Stocks and Shares ISA is subject to tax at a rate of 10%. The money which is taxed cannot be claimed back. However, if you have stocks and shares which are worth more than the maximum for a Cash ISA, this particular ISA is very beneficial.

    Although the maximum limit (£11,520) still applies, it can be chosen alongside a Cash ISA. Therefore, more than £23,000 can be deposited into an ISA. If you want to deposit other forms of capital into a Stocks and Shares ISA, you can – government bonds, corporate bonds and investment trusts are examples of such.

Author Bio

This financial advice was provided by http://www.findloans4u.com/. They offer guidance on logbook loan solutions and other short term loan options.

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