If you have a savings account and have been considering transferring some of your nest egg into an Individual Savings Account (ISA), now is the time!
If you invest in a Cash ISA before April 5th 2009 - the end of this tax year - you'll ensure that all the interest your savings earns will stay in your pocket rather than having to give up some of it to the tax man. Normally, taxpayers pay 20% tax on the interest earnt on their savings, while those in the high-rate band pay tax at 40%. Whichever salary band you're in, investing in an ISA makes good financial sense. as the interest will add up over time.
You can save up to £3,600 into a Cash ISA each tax year. So, if you have money in a savings account, but you don't hold a Cash ISA you're missing out! Right now the financial pages of the press are bursting with advice and handy hints. So how do you choose?
Choosing the right ISA for you
Cash ISA products are widely available from banks and building societies, but not all Cash ISAs are the same. As with all savings accounts, there are different types of account and savings rates vary significantly. So, it is well worth shopping around. The range of ISA accounts available includes easy access, fixed rate and notice accounts. Historically, notice and fixed rate savings accounts have tended to pay higher rates of interest than easy access deals, but that is not necessarily always the case. Talk to a financial advisor and compare the latest ISA rates available. Newspapers also offer best buy tables so that can be a good source of information too.
The small print
Some ISA products offer introductory bonuses, which means the interest rate will drop after a certain time period. While there is no need to avoid such accounts, you could take advantage of good deals and then move your money elsewhere once the bonus period ends. Otherwise, you could be left earning an uncompetitive rate of interest. It's a straight-forward process to transfer your ISA from one provider to another, but remember to check your ISA conditions to see if there are any restrictions on withdrawals.
Transferring an existing ISA
It's a straightforward process to transfer your ISA from one provider to another. So, if you already have an ISA, it's worth checking that you are getting the best possible interest rate available. The good news is that you are not obliged to stay with your existing ISA provider. You can transfer your ISA to another provider, often without penalty. However, you need to make sure you do this as an ISA transfer (a bank to bank transfer) - so that your money moves directly from your old Cash ISA account to your new one. If you take the money out of your ISA - and for example move it into normal savings account - it loses its tax-free status for good. You can transfer all of the money saved in your old Cash ISA in previous tax years into your new ISA without affecting your annual ISA investment allowance.
How much you can invest
The annual ISA allowance is £7,200 for each tax year. Up to £3,600 of this can be held in a Cash ISA. The remaining £3600 can be invested in a Stocks and Shares ISA. Consult a financial adviser to devise the best savings and investment plan to suit your needs. You must be aware that while you are allowed to transfer a Cash ISA to a Stocks and Shares ISA without affecting your annual allowance or the tax status of the investment, you will not be able to transfer a Stocks and Shares ISA into a Cash ISA, so choose carefully before you sign on the dotted line.
Halifax offers a complete range of bank account and personal investment products. Whatever you're looking for: from savings accounts to personal loans, a mortgage or a credit card at Halifax we aim to give you a little extra. We even offer help with your home insurance and travel insurance too.
