The ISA-ing on the cake

The clock is ticking for those of us thinking of investing in an ISA and hoping to make the most of this year’s allowance. It’s a matter of days now before the end of the financial year, with April 5th the deadline, and as people begin to shop around, competition from providers is heating up.

With some excellent new offers available those with savings should really be looking to make the most of their cash by using up their tax-free allowance. But choosing the right ISA can be a tricky business with various transfer-in regulations and other strings complicating matters.

If you’re on the look-out for a top ISA deal before your time runs out can offer some top tips.

I’S A no idea what you’re talking about

ISAs were introduced by the government in 1999 as a replacement for PEPs and are essentially a tax-free incentive to save. You can choose a cash ISA which is basically just a savings account or a shares ISA or a combination.

Currently you can invest up to 7,000 split between cash, and stocks and shares, and any income or interest you make will be tax-free.

The maximum you can invest in a cash ISA in a tax year is 3,000 and all the interest you earn on the money is tax-free. Therefore you can get a much better return than you would from a savings account offering the same rate.

Check out the transfer market

Obviously rates change, though, so what may have been a top cash ISA one year could have slipped by the next. Therefore most ISAs will allow you to ‘transfer-in’ from other ISA accounts, so that all cash is making the most of the best rate.

If you’re hoping to transfer, though, you’ll need to check that the ISA you opt for allows it as not all of them do. Barclays new cash ISA (available from 16th March) for example pays an excellent rate of 6.5% but doesn’t allow transfers-in, and the same goes for Egg’s cash ISA at 6.01%.

Strings and bonuses

As with pretty much all savings products various providers make use of bonuses and conditions to pull you in with a great rate, so it’s important to fully understand what you’re signing up for.

The Barclays cash ISA though offering a top rate of 6.5% only guarantees that rate for 12 months, and the same can be said for Abbey’s Direct ISA at 6.25%. Unless you’re prepared to switch when the offers expire these headline catching rates aren’t quite so special. If you’re looking for a longer term guaranteed rate you might want to consider the Easy Access ISA from Icesave at 6.1%.

The thickest string attached comes with Abbey’s Super ISA which, though offering a fantastic rate of 10% requires you to match whatever you invest in the ISA in their Guaranteed Growth Plan. It may sound a safe bet, but tracking the stock market as it does, you’re certainly not guaranteed to see the returns that a decent savings account could offer.

Get on with it

So if you’re looking to make the most of your cash be sure to check out all the details, but before taking too long remember that the deadline’s fast approaching and many providers will need the application form in by April 1, five days before the end of the tax year.

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