Isas

If the tax man offers you an opportunity to save tax you would be a fool not to take it!

The ISA (Individual Savings Account) was introduced in recent times to replace Tessas and PEPs, all three of these are savings accounts which offer a degree of tax savings.

Disgusting as it may seem for every £1 worth of interest you earn on your savings the Inland Revenue will take their share (the actual amount depends on your personal tax situation). The introduction of tax efficient savings schemes such as Isas was to give individuals an opportunity to stop the tax man taking their share.

As you can imagine this is not as fantastic as it initially sounds, there are limits to the amount of money you can put into Isas and further limits on withdrawals from your Isa.

When depositing into a Isa you choose whether to hold the money in cash (which is exempt from income tax) or in equity (shares and bonds that are exempt from capital gains tax), the levels of contributions vary each tax year but you can usually put more money in the equity Isa than the cash Isa.

Beware if you withdraw money from your Isa you will not be able to replace it again until the next tax year starts.