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Cash ISAs explained

Want a simple way to make the most of your savings?

A cash ISA could be just what you're after

No doubt you've heard of a cash ISA and you're probably wondering are they really as great as everyone says.

Well in a word, yes. If you're looking to make the most of your savings then a cash ISA could be the best place to start. Why? Because unlike normal accounts, any money saved with a cash ISA is currently tax-free, so you get to keep all the interest and the tax man gets nothing.

You can open an ING Direct cash ISA with as little as €1 and save up to €5,640 tax free before 5 April 2013.

What's more, under current rules, as long as your money remains in a cash ISA it will keep earning tax-free interest, year after year.

So that's why it's generally a good idea to start saving with a cash ISA. But if you want to know more about cash ISAs, then have a look at our enclosed guide. You'll find that we've answered some of the most commonly asked questions to help you start saving tax-free.

Cash ISAs, Made Simple

So, what are cash ISA tax-free savings?
Most savings accounts pay interest and a cash ISA is no different. In fact, some savings accounts may give you as much interest as a cash ISA.

However, the big difference is that with most savings accounts the taxman will come along and take a cut. But current rules state that with a cash ISA your interest is not taxed so you get to keep everything.

So it's no wonder that many people are turning to cash ISAs as a way of making the most of their savings.

How much can I save in a Cash ISA?
Currently you're entitled to deposit a certain amount of money into a cash ISA every tax year. This is called your cash ISA allowance and it's the maximum amount of money you can save in a cash ISA in one tax year i.e. from 6th April to the 5th April the following year.

Your Cash ISA Allowance for 2012/2013 is €5,640
And it's worth noting that once the tax year ends you won't be able to put another penny into that particular cash ISA for that tax year. Meaning if you haven't used your entire allowance by 5 April 2013, then you will lose any remaining allowance.

How do I deposit money into my Cash ISA?
Once open, you can start saving straight away. You can deposit money bit by bit, or in one big lump sum. In fact, you can save anyway you like, right up until you've reached your allowance or the current tax year ends.

But remember, your allowance and the balance of your cash ISA are different things. You can only deposit up to your maximum allowance and every single penny you put in counts towards this.

So for example, if you've put €1000 into your Cash ISA but then you take out €500, your balance will drop to €500 but you will still have used up €1000 of your annual Cash ISA allowance.

How do I access the money in my Cash ISA?
You can access your money but it does depend on the type of cash ISA you opened. For example with some fixed rate cash ISAs you may lose interest if you make a withdrawal and in some instances your account might even be closed. That's why it's best to carefully consider which cash ISA is right for you before opening one.

It's also worth remembering, if you've already reached your Cash ISA allowance for that tax year and you make a withdrawal, you won't be able to put that money back in again. Current rules state, as long as your money remains in a cash ISA the interest it earns will always be tax free.

So to really get the most out of a cash ISA, it's generally better to not touch your money unless you really need it.

What happens when the tax year ends?
Once the tax year is over you won't be able to deposit any more money into your cash ISA for that tax year, even if you haven't used your full allowance.

However, under current rules, the money you've already saved over the tax year will continue on earning tax-free interest, month after month, year after year.

In fact, the current tax rules state that as long as your money remains in a cash ISA it will always earn tax-free interest, helping you to really make the most of your savings.

You can open a cash ISA with the majority of banks and building societies.

Any more questions?

So there you go, that's our simple guide to cash ISAs. If you like the sound of what you've read but you're still a little unsure, then please do get in contact.
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