So you'd like a cash ISA (individual savings account), would you? Learn more about how cash ISAs work, the difference between mini cash ISAs and maxi cash ISAs, and how to find the best cash ISA.
A cash ISA operates in exactly the same way as if you were putting money into a building society savings account that pays interest (only this time, you don't pay tax on the interest). The limit for contributions to a mini cash ISA or to the cash component of a maxi ISA are £3,600 per tax year.
Finding the 'best' cash ISA
Obviously what you are looking for is the best interest rate possible at the time of opening the ISA, as well as an interest rate that remains competitive in the future. The first is relatively simple but the second is trickier because you don't know what your chosen provider will do with its rates in future.
If there is a guaranteed or bonus rate make sure you check how long that rate will continue for -- sometimes it may only be for a few months. Banks also have a habit of attracting us with high rates when they launch a new account and then quietly cutting their rates at a later date by sending a boring letter that you throw in the bin because you think it's a circular.
To help you find the highest payers "Best Buy" tables are published regularly in the weekend money sections of many major newspapers and many financial websites will have similar information.
Keep an eye on your ISA
Should the interest rate fall, or fail to rise in line with others on the market, you can switch your cash ISA to another bank or building society that offers a better rate. All you do is tell the new bank that you want to switch your ISA to them and they will help you to arrange the transfer of your savings for you.
On no account should you close your current cash ISA, withdraw the money and try and put it into a new ISA. This would count as a new subscription and waste some or all of your ISA allowance for the current year. You want your money to remain safely inside your ISA while it's switched to a different location. Note that some ISAs make a charge if you decide to move your funds. You may have to check the small print to find this. It's advisable to avoid these accounts in the first place if possible.
One extra point about cash ISAs is that, ordinarily, you have to be 18 to open any kind of ISA. However, anyone aged 16 or over can open a Cash ISA. Although few people aged 16 or 17 pay tax, if you intend to keep your money within your ISA for several years you may save tax on the interest you earn in subsequent years.
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