Cash ISAs Becoming More Popular

Although many of us cannot spare much money to put into our savings it seems that those who can are doing it more often. According to a Scottish financial institution cash ISAs are being invested in more frequently.

Deposit levels in these types of nest eggs have increased by almost ten per cent at Clydesdale Bank. In addition, the average balance has increased by nearly £350. Its retail director said they were "focused on supporting all our customers".

"Our cash ISAs are proving very popular not just with customers saving for the longer term, but also with those who prefer to have the safety net of having instant access to their money," he said. It was perfect for people with a "large sum" of cash he added.

In an attempt to "go further" for people storing money away, the chancellor increased the total annual ISA limit as part of his latest Budget.

What is an ISA?

Individual savings accounts (ISAs) were introduced in April 1999. They replaced TESSAs and PEPs and are effectively a tax wrapper within which you can hold a range of different investments. The big advantage of an ISA is that returns are tax-free – gains on investments held outside an ISA are liable to income tax or capital gains tax.

There is a maximum limit which can be invested in any one tax year. The government can change this value and it is worth looking into this before you invest. You can open one cash ISA and one stocks and shares ISA each tax year. Usually there is a minimum amount required to open an account often only as much as £10.

As with standard savings account, there are a number of different types of cash ISA - easy access, fixed rate and notice accounts – and rates vary significantly so it is well worth shopping around and not just opening a cash ISA with your current account provider.

ISAs were introduced in April 1999, so those who have made full use of their annual allowances every year since then, will have sheltered £77,400 from the taxman.

If you would like to know more about ISAs why not ask AnswerBank Business and Finance.