You recently might have seen or heard on TV, the radio or in the papers about an ISA deadline on 5th April. It all seems very important, but what is it?
When they say an ISA is tax-free, what exactly does it mean? Are you getting taxed on money you have elsewhere? Then there’s all this stuff about annual allowances, transferring and not withdrawing… it can be pretty confusing.
Whether it’s the right thing for you is another matter.
Interest rates aren’t great. In fact they’re poor. As I write this, the best instant access ISA (i.e. one where you can get money out whenever you want) is Stafford Railways Building Society, and it has an interest rate of 1.75% AER (see our 9 Interest Basics for explanations of what terms like AER mean). If you wanted to fix, you could get 3% on a five year ISA with Skipton Building Society, but you wouldn’t be able to access your money without paying a penalty, and there’s every chance rates will be much better by 2019.
Alternatively you can look at some of the very competitive current accounts around at the moment. Nationwide pays up to 5% AER before tax (so that’s 4% for most people) on balances up to £2,500, while Santander offers 3% (so 2.4% after tax for most) if you have between £3,000 and £20,000. Plus if you switch your current account, banks such as First Direct, Co-Op and Halifax have £100 bonuses. However there are restrictions around balances, amount of money that needs to be paid in and number of direct debits that need to go out. Plus the interest rates could well fall too.
You can read our 6 Ways to Make Your Bank Account Pay guide for more on the interest and other benefits on offer.
If you happen to have more than £85,000 in savings, make sure you spread them across different banks. If one was to go bust, you’re only protected to that amount. And be careful of banks and building societies that are part of the same group – that £85k might be split between them.
Rates of accounts mentioned here will change, so double check, and always research to see if there’s anything else on the market.