What Are ISA Accounts? |
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There are two types of ISA savings Accounts - Cash ISA’s and Stocks & Shares ISA. Both allow you to save money and receive the interest or dividends and the gains in your shares Tax Free. |
What is a Cash ISA Account? |
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The Cash ISA is the easiest part of the whole individual savings account regime to understand. It is simply a way of saving money in an account that allows you to earn the interest generated by your savings free of tax.
Any taxpayer keeping money on deposit in an ordinary savings account is already paying tax on interest earned. Basic rate taxpayers see their rate of interest cut by 20% tax that is deducted automatically from the interest paid on your savings. Higher rate taxpayers have to pay an additional 20% tax on interest income with their tax return.
However, save your money in a Cash ISA and the interest you earn is the interest you get and there is no further bill for higher rate taxpayers. So, basic rate taxpayers are 20% better off on their tax liability and higher rate taxpayers 40% better off by putting their savings into a Cash ISA. What's more, you don't even have to show your Cash ISA on your income tax return. |
How much can I save in a cash ISA ? |
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The maximum amount you can save in a cash ISA is £3,600 in each tax year, which runs from April 6 to the following April 5 in the next calendar year.
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