Opening up an ISA can be one of the most effective ways to save and earn interest without paying tax. Once you’ve invested in one there are many ways to ensure you are seeing the best possible return. Our accounting experts have put together a few tips to help you get the most out of an ISA.
Keep Checking the Interest Rates
Many ISA’s offer a very high introductory rate, which then falls dramatically after a set period of time, make sure you pick an account that will remain competitive, as some end up earning as little as 0.1 per cent on their savings.
Use your Full Allowance
The current limit which can be placed into a Cash ISA is £5640. This allowance does not carry over year to year so will be lost if not used. It’s also smart to invest the full amount at the start of the year, this way you’ll be earning maximum interest for almost a full year.
Follow the Right Procedure
If you decide to transfer your ISA to a different provider it pays to make sure all relevant applications are filled in with the new provider and the whole process is done properly, otherwise your savings could end up losing their tax free status at some point during the transaction.
Make Sure the Account is Appropriate for You
Fixed rate cash ISA’s currently have the highest rate of interest, however, they last for a set amount of time and there are usually penalties for early withdrawal, if it is permitted at all. It’s still possible to get a decent rate on an instant access ISA, shop around for the best deal and don’t tie your money up if you think you may need it.
Interest rates, which are currently at a record low, are sure to bounce back at some point in the future. If you’ve been using an ISA to save money, investing the full allowance each year, you’ll be earning tax free interest on a good amount of money when this happens..