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Compare ISAs with Money Pug
- When you want to save money, you want to get the best savings deal to suit you. ISAs are designed to allow you to save your hard earned cash and avoid paying tax on the interest you earn, regardless of your income. ISAs were introduced back in the last century, and were designed to encourage people to save. But the world of ISAs can be a little confusing, and it can be difficult to know whether an ISA is right for you and, if so, which one you should go for.
What do I need to know to compare ISAs?
- Plenty of ISAs are available to be applied for online so often you will not even have to pick up the phone or go into a branch in order to start saving in this way. All you will need in order to compare ISAs with Money Pug is a few simple pieces of information:
- Your national insurance number.
- Your address.
- Your occupation.
- Details of any current ISA accounts you may wish to transfer into a new ISA.
While ISAs are available to many people, it is important to note that some ISAs have age restrictions placed upon them, while others may require a certain level of deposit in order to open.
What Types of ISA are available?
Cash ISAs
A cash ISA is generally speaking the simplest form of ISA, allowing you to save cash and gain interest without paying tax on that interest earned, up to the yearly tax-free allowance amount. This is a far preferable method for saving money than storing cash under your mattress and while saving interest rates are hardly the most rewarding right now, this could still be a safe and secure way to stow your money and be fiscally responsible when it comes to dealing with the money you are able to put aside.
Fixed Rate Cash ISAs
- With a fixed rate cash ISA your money is ring-fenced and you will receive a certain amount of interest for a given length of time – usually one, two or five years. The longer a term of fixed rate interest you agree to the better return you are likely to see. Interest rates on longer fixed rate deals can tend to be higher than those on shorter deals. Of course, with these fixed rate deals, it is not normally possible to access your funds before the term of the contract is up. If the service provider does allow money to be withdrawn from an ISA of this type, then they will usually require a penalty fee to be paid. Do be careful to check the terms and conditions on any policy extremely carefully, especially if you are thinking about taking a longer term fixed rate deal. Remember, it is important only to choose this kind of ISA if you do not need a access your funds during the term of the contract, and if you are entirely certain that you have found the right deal and are happy to commit to that deal for a certain period of time.
- How long a fixed rate ISA you go for will depend, of course, on your own individual circumstances as well as how long you are happy to lock your funds away for. A shorter-term fixed rate ISA could be a good way to tentatively try out this option, which will offer a better rate of interest than an easy access ISA. As mentioned, however, the longer the term, you will frequently find, the better the rate that is offered by the bank or building society.
- Note though – the interest rate could go up as well as down. If you opt for a fixed rate deal then you could be tied up with an agreed interest rate even though you may by that point be able to get a better deal elsewhere. Check account restrictions and do think very carefully before committing yourself to any longer term deal.
Self-select ISAs
Like a cash ISA, a self-select ISA offers a chance to make tax-free savings. However, rather than cash, a self-select ISA takes the form of stocks and shares. With a self-select ISA, you yourself will select the stocks and shares that are held within your ISA rather than having a fund manager who will make these decisions for you. These ISAs are generally speaking only a good idea for experienced investors who know what they are doing. If you wished, you could split your tax-free allowance and have a certain amount in a cash ISA and a certain amount in a self-select ISA or a different form of tax free savings account. A stocks and shares ISA offers a more risky savings account option, since investments may not always pay off. If you are an experienced investor and do decide on this ISA option the you will also have to choose whether you will go doe an execution only option, or will select an option with a broken that offers advice. Execution only brokers usually offer the best deals, since these simply provide a trading platform and will not have the benefit of the broker’s knowledge of the markets.
Stocks and Shares ISAs
- Stocks and shares ISAs deal in these commodities rather than in cash. Most stocks and shares ISAs, unlike the self-select option above, will offer the opportunity to buy into a portfolio created by a fund manager for you. With these options, you will not need to know about the markets and investing yourself and can rely on the expertise of others. Though of course it is important to remember that your savings will be in the control of these agencies, and the value may go down as well as up, depending on the quality of the investments and the state of the market in general.
Innovative Finance ISAs
An innovative finance ISA, sometimes called an Ifisa, is a savings account that contains peer to peer loans instead of cash or stocks and shares. Peer to peer lending matches up investors with those who wish to borrow, be they individuals, businesses or property developers. Sometimes, by cutting out a bank and investing online in a portal for peer to peer lenders, you can often earn higher rates of interest than you could do with a traditional savings account.
Help to Buy ISAs
If you open a help to buy ISA to help you save up a deposit for your first home, the government will chip in with a cash contribution of 25% of what you are able to save. Over five years, if you saved the maximum of £12,000, this incentive would add £3,000 to your balance.
Junior Investment ISAs
A junior investment ISA is designed as a savings account where you can accumulate tax-free interest for a child. These long term savings accounts for those under eighteen cannot be accessed or cashed in before this time. The savings limit for Junior ISAs in currently £4,260.
ISA FAQs
- The main reason to choose an ISA is that they allow you to save money without paying tax on the interest that you earn. The tax-free ISA allowance is designed as an enticement for all of us to save. There is a limit on how much you can save annually within this tax-free allowance. This figure increases year on year depending on the current rate of inflation, though currently, if you are a UK resident over 16 years old, you can save £20,000 tax-free in an ISA each year. The interest will be tax free, though of course the interest that you will receive will depend on the account that you choose. That is where Money Pug comes in, helping you to compare all the options and find the right ISA for you.
If you already have an existing ISA and want to switch that ISA to a different bank or building society that offers a better rate of interest or better terms in another regard then you should simply tell your new bank that you are interested in switching to them and they should organise the whole transfer for you. The whole thing should be easy to accomplish and hassle free, leaving you safe in the knowledge that you have found the right deal for you when you have compared with Money Pug.
Take note that it is not a good idea to close an existing ISA, withdraw your money and then open up a new ISA, because doing so, you would use up a new subscription and therefore some of your annual ISA allowance. Instead, simply compare with Money Pug to find the right new ISA deal, then approach the provider so they can handle the ISA switch.
We include every UK ISA you get in the UK from our panel of providers. . They are all either directly regulated by the Financial Conduct Authority. or providers that are partnered with a company regulated by the FCA.
The maximum ISA allowance for an adult in the UK is £20,000 per annum. This is the maximum amount of savings that can be held tax-free in an ISA wrapper.
No. You cannot carry over ‘unused’ ISA allowance from one year to the next. No matter how much of the £20,000 you managed to save in the current tax year, your allowance for the following tax year will remain the same.
If you accidentally place more than the maximum allowance into your ISA, do not try to rectify this yourself. You will be taxed on the amount over the threshold, and the HMRC should contact you to let you know what to do next and with details of tax you owe.
One of the most common misconceptions about ISAs is that you can only have one at a time. You can’t open more than one ISA of the same type, that is true – but you can split your yearly allowance over different sorts of ISA – between a cash ISA and a stocks and shares ISA, for example. Though you can split the allowance between different sorts of ISA in whatever way you want – £5,000 in a cash ISA and £15,000 in a stocks and shares ISA, for example, it is important to remember that you will still only be able to have a total of tax-free savings up to the allowance level of £20,000.
It used to be the case that you could only divide your allowance in half. Now, however, you can divide your allowance between the different types of ISA in almost whichever way you see fit. There are only two limitations to the rule on splitting your allowance:
- You can only open one cash ISA, one stocks and shares ISA and one lifetime ISA each tax year.
- You can only put up to £4,000 in a lifetime ISA.
How easy it will be to access the funds saved in an ISA will depend on which ISA or ISAs you have chosen to use. Some ISAs do tie up your money for a considerable period of time, while others are pretty flexible. Variable rate cash ISAs are a good option for those seeking flexibility, as they do not tend to have a minimum commitment, meaning that you can deposit your money for as little or as much time as you like. Fixed rate ISAs will tie up your money for a certain length of time, but also tend to offer much better rates of interest. Stocks and shares ISAs do not tend to have a minimum commitment but your money will have to be converted back to cash before it can be withdrawn and this can take some time.
How likely you are to lose money on an ISA (and therefore how risky they are deemed to be) will depend on what type of ISA you have opted for. Different kinds if ISA carry very different levels of risk. Cash ISAs are the least ‘risky’ option. With a cash ISA, your money is as safe as it would be in any other bank account. Your money is not invested but rather held entirely in cash. Your money is also covered by the Financial Services Compensation Scheme, so if your ISA provider goes bankrupt, you will get your money back up to £85,000.
With stocks and shares ISAs, your money is invested in the stock market. With any investment, there always comes an element of risk. You may make money – but you can lose money too. You will often have the choice between making cautious, balanced or adventurous investments. Which you plump for will depend on your own attitude to risk, and how comfortable you feel with taking a gamble.
ISAs and personal pension plans are both types of saving account with tax benefits. An investment based ISA could, potentially, grow your savings as much as a pension plan in the long term. It is worthwhile noting, however, that personal pension plans have certain benefits that ISAs do not, namely:
- A higher tax-free allowance than the yearly ISA allowance.
- Tax back on all contributions, up to a maximum of 45%.
- The potential for your employer to contribute via the workplace pension scheme.
- Inability to withdraw funds before you are 55, so no temptation to dip in early.
You will maximise your tax savings by using an ISA to supplement, not to replace, your personal pension plan. Having an ISA and a personal savings plan makes the most financial sense.
How, when and in what circumstances you can move money between ISAs will depend on what type of ISA you have and the policies of the ISA provider in question, though it is often possible to do so.
If you wish to transfer existing investments with other providers to a stocks and shares ISA then you will not usually be able to do so directly. These investments will usually have to be turned into cash before they are added in to the ISA portfolio. This process is called ‘Bed and ISA’.
Since an ISA is tax-free up to the £20,000 limit, it is definitely a good choice for saving a large deposit for UK tax payers.
If you move abroad, you can keep your ISA and will continue to receive tax relief on your saving and investments, but you cannot make any more contributions to the account. The only exception to this is if you are a Crown employee working overseas, or their spouse or civil partner. If you move back to the UK again at any point, you can start paying in again.
