Finding the top ISA is the key to maximising your tax-free savings, but what should you look for in an ISA, what are the best rates, and should you be looking for specific ISAs dependent on your age, like the best ISA rates for over 50s?
What is a cash ISA?
Cash ISAs (Individual Savings Accounts) are tax-free savings accounts – you can put in up to £15,240 in the 2015/16 tax year.
Everyone aged 16 or over can have a cash ISA (but for some ISAs, usually with stocks and shares options you must be 18). Otherwise there is no age limit or preference to ISAs.
Those looking for the best ISA rates for over 50s however may be able to commit to longer-term or stocks and shares ISAs, rather than instant-access.
How do cash ISAs work?
The annual limit of £15,240 only applies to the money paid into your account, not your overall ISA balance.
This means that if you paid £15,240 into your ISA at the start of the tax year and then withdrew £1,000 a month later, you wouldn’t be able to add any more money to your ISA during the same year.
There’s a fixed cap on how much you can save tax free each tax year, which runs from April 6 to April 5 the next year.
The cap – known as your ISA or tax-free allowance – is set by the government.
What types of cash ISA are there?
There are three main types of cash ISA:
- Instant access (or easy access) cash ISAs – these allow you to withdraw money from your account at any time without charge
- Notice cash ISAs, which require notice – usually between 30 and 120 days – before you can access your money
- Fixed-rate cash ISAs – these ISAs tie up your savings between one and five years, providing a fixed interest rate for that term
If you want to lock up your savings for a while, you might want to consider a fixed-rate cash Isa.
These lock away your money for a set period, usually between one and five years, and in return pay you a higher interest rate.