Savings plan for the new financial year

by Leeds Building Society

ISAs: start the new financial year with a savings plan

A tax-free§ individual savings account (ISA) is a great way to start building towards your savings’ goal during the new financial year. Unlike other savings accounts, interest earned on your savings will not be taxed. For the 2015/16 financial tax year you can save up to £15,240 tax-free.

There are two types of ISAs; Cash ISAs and Stocks and Shares ISAs. This guide relates to Cash ISAs.

Who can open one?

UK residents aged 16 or over can open a cash ISA.

Who offers cash ISAs?

Most high street banks and building societies offer a range of cash ISAs.

When does the financial year start?

The financial year runs from the 6 April to 5 April each year.

How much can I save tax-free?

Your overall ISA allowance is £15,240 for the 2015/16 tax year. This can be saved in a cash ISA, a Stocks and Shares ISA or a combination of the two. However, if you decide to save in both, the total amount invested must not exceed £15,240.

Can I take money out of a cash ISA?

You can withdraw money from a cash ISA. However, you should always check the full details of your ISA account as there could be restrictions and penalties if you decide to withdraw funds.

You should also keep in mind that if you take money out of your cash ISA the amount withdrawn will count towards your overall ISA limit for the financial year. For example, if you have £5,240 in your cash ISA account and withdraw £5,000, you’ll only be able to save an additional £10,000 tax-free.

When can I pay into a cash ISA?

Some cash ISAs allow savers to pay in to them at any time during the financial year. However, some accounts have restrictions and/or time limits on when you can pay money in. Some accounts might also require you to deposit a certain amount in order to open the account (a minimum deposit). You should always check the terms and conditions to make sure the account meets your needs.

How many cash ISAs can I open?

You can only open one cash ISA per tax year. Some providers allow savers to transfer in balances from previous years' cash ISAs, which can help you bring all your tax-free savings together in one place or simply maximise the interest on your savings.

Can I transfer my ISA?

You can transfer your cash ISA to another provider at any time during the tax year. Always check with your current provider to find out if there are any restrictions or charges in doing so.

HM Revenue and Customs (HMRC) guidelines state that transferring your cash ISA between providers must be completed within 15 working days after receiving your instruction to do so.

If you close your cash ISA account, other than by transferring it to another cash ISA, it will lose its tax free status.

What is a fixed rate cash ISA?

Fixed rate cash ISAs let you lock away your money for a fixed period at the same rate. Usually the longer you commit to investing your money the better the interest rate. You can still access your money at any time but early withdrawal penalties may apply.

What is an easy access cash ISA?

Instant or easy access cash ISAs allow savers to pay in and withdraw money as and when they like. Interest rates tend not to be as favourable as fixed rate accounts.

Remember, if you take money out of your cash ISA, any money withdrawn will count towards your overall ISA limit.

When will interest on a cash ISA be paid?

Interest will be paid either monthly or annually depending on the product you choose.

How much could I earn?

Just like any other savings account it depends on how much you save and the providers’ interest rate. However, saving with a tax-free cash ISA will mean that you will keep all of the interest you earn.

Find out about the range of cash ISAs from Leeds Building Society. Leeds Building Society does not currently offer Stocks and Shares ISAs.

This guide is intended as a summary only and does not constitute legal advice given by Leeds Building Society. No reliance should be placed on this guide and you must make your own decisions, we recommend that you seek legal and/or financial advice if you have any questions or queries.

§Tax-free means that interest payable is exempt from income tax. Cash ISAs are available to individuals aged 16 and over who are resident in the UK for tax purposes.