What to be aware of when considering a Cash Isa

POSTED: 1st February 2013
IN: Personal Guides

An individual savings account (Isa) is a great way to build up a pot of cash and protect it from the taxman.

undefinedIsa accounts were first launched in April 1999 and offer up an efficient method for ensuring you have savings in place for a range of expenses.

Indeed, you may find you want to redecorate your home, or have a fund in place to prepare for when the children head off to school, so Isa accounts can be an excellent way to store money.

Although there are two types of Isa accounts - Cash Isa and Stocks and Savings Isa - the former is typically more useful for those who want a short to medium-length savings plan.  

The main issue you have to be aware of when setting up an Isa is that your savings are capped at annual contributions of no more than £11,280.

And, with the tax year ending on April 5th, the final few months as the deadline approaches are paramount if you want to hit the maximum amount you are allowed to save tax-free.

To be eligible to open a Cash Isa, you must be at least 16 years of age and must be resident or ordinarily resident of the UK for tax purposes. You cannot, however, open an Isa jointly or on someone else's behalf.

If you already hold a Cash Isa and are wondering about transferring it, that is not a problem. All you need to do is ask your new Isa manager to arrange the transfer.

Your existing provider may charge you, depending on your agreement, but it is always worth bearing in mind the flexibility of one account over another.

It is important to note, too, that most providers will not allow you to open two Cash Isa accounts at the same time. However, Aldermore will as long as the two accounts do not combine to exceed the £5,640 limit, or £5,760 from the next financial year. 

Once you have begun to see how easy saving can be with an Isa, however, you may find it a good motivator for putting money aside for future use.

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