How to find the best cash Isa What is an Isa?
Isas are tax-free savings or investment accounts offered by banks, insurers, asset managers, building societies and National Savings & Investments (NS&I). There are two main types of Isa - cash Isas and stocks and shares Isas.
In a stocks and shares Isa, all capital gains and income are protected from tax (although all dividends are still subject to 10% tax). All interest earned on money held in a cash Isa is tax-free.
If you are a basic or higher-rate taxpayer, the interest you earn on savings will usually be taxed at 20% or 40% - so Best Rate cash Isas often offer a better return than Best Rate savings accounts once tax is taken into consideration.
The overall Isa limit for the 2013/2014 tax year is £11,520, of which £5,760 can be placed within a cash Isa. These limits will rise each year in line with the Consumer Prices Index (CPI), rounded to the nearest £120.
All UK residents aged 16 or over can have a cash Isa, although you must be 18 before you can open a stocks and shares Isa. Crown employees serving overseas or individuals married to such employees are also eligible to open Isas.
What are the different types of cash Isas?
There are two main types of cash Isa accounts - instant access (or easy access) accounts and fixed-rate cash Isas.
Instant access and easy access Isas allow you to withdraw your money whenever you like, whereas fixed-rate accounts tend to pay a higher rate of interest but require you to tie your money up for at least a year.
- For more information on cash Isas call our Money Helpline for a personalised solution
- To compare instant access and fixed-rate cash Isas, see the Which? Cash Isas review.
- Take a look at our cash Isa Recommended Providers