ISA Rates

Back in 1999 the Labour government decided to do away with the old tax-free savings initiatives (namely the TESSA and the PEP) to introduce a fresh way of saving for the future. Their aim was to try and encourage UK residents to save more and thus be more prepared for any future financial outlays or concerns.

They now allow an individual to invest up to £7,200 or £10,200 depending on your age and receive 100% any gains. It is a sort of tax haven that you can use to for both cash savings and share investment - but only in certain strict proportions.

There are two forms of ISA; the stocks and shares ISA and the cash ISA and the difference is really quite simple.

A stocks and shares ISA is where you can invest in stocks and cash with just one account and with a single company. If you are aged 50 or above you can invest up to £10,200 with a maximum of £5,100 being in cash form. For those people below 50 years in age the ISA limit does not change until the following tax year so for now you are still restricted to £7,200 in total with up to £3,600 in cash form.

You can invest the full amount in stocks and shares with this type of ISA should you wish to do so.

A cash ISA allows you to save £5,100 / £3,600 per year just as you would in a savings account but you will not pay any tax on the interest you receive. While you are limited to how much you can save each year, it is sometimes possible to transfer previous years' balances into a new account if you wish.