Before April 1999, Personal Equity Plans (PEP) and the Tax-Exempt Savings Account (TESSA) were the smartest way to save your money, however with the introduction of the Individual Savings Account (ISA) comes a better tax free way to save your cash.
Although Personal Equity Plans are still an efficient way to save your money, you are limited to only being able to invest £2,400 per year. Tax-Exempt Savings Accounts, on the other hand, were created to assist the equity-orientated PEP by providing a way for investors to place their cash in a tax exempt account. Since the introduction of the ISA it is not possible to open a new PEP or TESSA. A great advantage of the ISA is you can now invest up to £5,640 in a cash ISA and up to £11,280 if you split this amount between cash, and stocks and shares.
An ISA is easy to open and easy to manage and there is a great variety of building societies and banks who will give highly competitive rates and offers. Choosing the ISA that is best for you can seem like a difficult task but there are professionals in every branch who can explain the benefits of their account so that you can make an informed decision.
Currently the best rate ISA to choose is a 3.5% with AA savings . This is an AA Internet Access ISA and comes with a fixed bonus of 3% for the first 12 months with a variable rate after this period.
This particular ISA works by being linked to your current account so that you can transfer your money between the two. With this ISA you are required to invest a minimum of £2,500 in order to open the account and can then save up to £5,640 in the coming tax year. This account will provide you with unlimited access to your money with annual interest and you can even keep track of your account with their easy to use online banking.
If you would prefer to open a fixed ISA then the best option at the moment is 4.5% from Halifax. The disadvantage of a fixed ISA is that for the period set out in the agreement you are unable to withdraw any of the cash that you have invested.
The Halifax ISA Saver Fixed Account comes with a five year term in which you can’t touch your money. On the upside the interest rate will also be fixed however it will decrease with each year. After an initial £500 deposit, you will be able to invest up to £5,460 per tax year. You will be able to access this account in branch, over the phone and online so you can always manage your money. A fun bonus of this ISA is that all holders are entered into the Halifax Savers Prize Draw where every month 3 account holders will win £100,000.
Easy Access ISAs
One other great easy access ISA account that could really work for you in the coming tax year is the NatWest e-ISA. With this account your interest is variable from 3% to 3.5% and will additionally include a fixed bonus rate of 1%.
This is a limited offer from NatWest that could be withdrawn at any time so investing now could be the best thing you do for your money this year. When you open this e-ISA you will be allowed to transfer all of your cash ISAs into it and the bonus is added on to the existing interest rate from the following month.
Tax free saving is an excellent way to let your existing money grow and finding the right ISA to do this is pivotal to ensuring the highest returns to you. If you already have an ISA and you are not happy with it then the impending new tax year is a great time to swap to a better choice. Unless you are tied in to a fixed term ISA then it should be possible to release the funds in your existing ISA and place them in an account with a higher interest rate and better usability. As most ISAs will allow you to transfer your money directly from your old account, this needn’t be something which requires a lot of effort.
|Written by :|
|Jemma is a news & research reporter for compareandsave.com.
Having worked as a journalist on a number of personal finance websites; she now spends time researching and commenting on UK personal finance stories and investigating new ways to help our readers save money.
For press enquiries, please visit our Media Centre page.