Five questions on: Isas


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Why are they in the news?

Because you have just four weeks to make the most of your 2014-15 tax-free Isa allowance.

How much is it?

You can stash up to £15,000 in the current tax year – which ends on 5 April – in an Isa. The big news this year is that they have become much more flexible: now you can transfer cash from savings accounts to investments and back again within your Isa.

Explain again what Isa stands for?

It stands for individual savings account. Because of the tax benefits, if you're a basic-rate taxpayer, the return you can get outside an Isa is worth 20 per cent less than within the tax-free environment. If you're a higher-rate payer, it is worth 40 per cent less. In other words, if you have savings and fail to put them into an Isa, you're in effect handing cash to the government. You're eligible for the tax allowance so just bear this in mind: if you don't take up the current year's Isa allowance by 5 April, you lose it.

Should I open a cash or equity Isa?

If you're not sure, start with cash; you can always switch into funds or shares later, under the new rules that came into force last July.

Are there good cash Isa deals around?

As we near the deadline, more new attractive Isa deals are likely to be launched. Anna Bowes of said: "We have seen an increase in Isa activity as we move towards the end of the tax year, with more providers launching new Isas. Both Shawbrook Bank and State Bank of India have launched new 'best buys' and HSBC has introduced an incentive that will encourage its customers to pay into their Isa."

Meanwhile a new contender – Charter Savings Bank – has launched some competitive accounts, Ms Bowes added. "New faces to the savings market are always a welcome sight, particularly if they can encourage more competition by challenging the current best buys."

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