Stash cash in an ISA before it's too late

Putting money into a mini cash individual savings account (ISA) is a complete no-brainer.

If you've got money to put by, it should go straight inside one of these tax-free savings wrappers. Fail to do so and, in effect, you're donating cash to the Chancellor's coffers.

You can save up to £3,000 a year tax-free in a mini cash ISA - and rates are currently topping 5 per cent. But with the end of the tax year looming (it's less than three weeks away, on 5 April), you'll need to act fast if you're going to take advantage of this year's allowance. Any part of it remaining unused by the above date will be lost.

"Time is of the essence," says Susan Hannums from independent financial adviser Chase de Vere. "It is vital that if you have cash languishing in any account and have not made use of your ISA allowance, then you should do so immediately. What is the point of paying tax on your savings if you don't have to?"

Many ISAs now offer the benefits of easy withdrawal and penalty-free access. Abbey even offers an ISA account that comes with a cash card.

Lisa Taylor from the financial analyst Moneyfacts stresses that mini cash ISAs are not just for those people with long-term savings plans and large sums to invest. "Cash ISAs can offer instant access to funds while requiring minimum deposits as low as £1," she explains.

But before they take the plunge, it's crucial that savers understand the conditions attached to their chosen account.

"Some will charge you to transfer money into a cash account [from another account]," continues Ms Taylor. "And they often include short-term bonuses within the [advertised interest] rate."

An astonishing three quarters (23 million) of UK taxpayers will put nothing into an ISA this year, research by Portman building society shows. That means we're missing out on £3.56bn in tax-free interest.

For "pure simplicity", Ms Hannums picks out the Halifax's Saver Direct ISA, paying 5 per cent on balances of £1 or more. Alternatively, she recommends Alliance & Leicester's Direct ISA (issue 2), paying 5.2 per cent, also on balances of at least £1.

"This does include a bonus of 0.7 per cent," she points out. "But it lasts until April 2007, so you should take advantage of the rate now, and then move your money when the bonus comes to an end."

For those happy to bank online, Bradford & Bingley pays 5 per cent on its internet-only account (a minimum investment of £1,000 is required).

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

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