ISA stands for ‘Individual Savings Account’, and is a good way of saving money as it allows you to invest up to £7,200 per annum, without having to pay any tax on the interest that is earned.  This maximum limit is changing on 9 October 2009, and after this date anyone born on or before 5 April 1960 will be able to pay up to £10,200 into their ISA accounts per year.

ISA’s were introduced by the government back in 1999 to help encourage people to save and invest their money, and under the current rules if you were to save the maximum allowance (£7,200) every year for 40 years, then you could end up with a cash fund of over £288,000 (excluding any capital gains), which is securely protected from the tax man and ready for when you retire.

There are many different types of ISA available, and with some providers you will be able to pay money in whenever you want until you reach the maximum amount, but with others you may have to meet minimum investment limits before you can pay any money into your ISA.

Multiple ISAs
You can invest in up to two ISA’s in the same tax year as long as it is split between one cash ISA and one Stocks and Shares ISA:
*    Cash ISA – this type of ISA is ideal for short term saving as it is basically a tax free savings account which allows you easy access to your money. There are a variety of different cash ISA’s available offering a range of different interest rates including fixed and variable rates, and it is worth shopping around to make sure you get the highest interest ISA you can.
*    Stocks and Shares ISA – this type of ISA is good for those people who want to invest money and can afford to leave it to mature without touching it for at least 5 years.  The cash you put into the account will be invested in stocks and shares, and any profits made from these investments will be protected from capital gains tax.

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