How to open a tax-free savings account

Choosing the best savings account is a decision that many people rush into, but there are smarter ways of handling it.

09:24 17 September 2013

ISA is one of the best savings accounts available on the UK market (only for UK citizens) as it offers tax-free services. The ISA allows to you to save any income you may receive from such things as shares or stocks, and not pay taxes for them. There are two types of ISA, one of them is for cash (you must be 16 years-old at least to open it), and the other for investments (in this case, you have to be at least 18 years-old). Let's take a look of the major advantages of this particular savings account:

• ISA allows you to open two savings accounts, one in cash, and another in investments, both amounting to a total of £11,520;

 

• the cash ISA works just like a regular savings account, but no taxes or interest have to be paid;

 

• the investments ISA generally offers no tax or interest payments either, but for this particular savings account, you may have to pay some taxes, depending on what you invest in;

 

• you can open as many ISAs as you want during your savings period, but you can only have one cash and one investment ISA a year;

 

• ISA is the most popular type of savings account in the UK, which is a guarantee that it actually works for a lot of people already;

If you want to open an ISA saving account, make sure to read the contractual regulations carefully, as there are specific norms concerning the type of investments you are allowed to make and how much money you can save each fiscal year without paying taxes for it. You should know exactly what ISA is and how it works before joining the other 20 million UK citizens who use it.