Tax-free saving doesn't have to be taxing

FINANCIAL EXPERTS EXPLAIN EXACTLY WHAT INDIVIDUAL SAVINGS ACCOUNTS ARE, WHO SHOULD OPEN ONE, AND WHAT THE BENEFITS ARE FOR YOU. BY SARA KEENAN

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THERE has been a rise in the number of people opening Individual Savings Accounts (ISAs) as a means to save and also make tax-free money.

According to the Bank of England, in February alone, £3.5bn went into cash ISAs. However, for many, understanding what exactly these savings accounts are and how they work, can be overwhelming.

Whether this is the first time saving and investing, or if the number of options has you in a spin, it can be quite difficult to wrap your head around.

Here’s a guide about all things ISA to make the process a little bit easier.

WHAT IS AN ISA?

Rachel Springall, finance expert at Moneyfacts, explains that an ISA offers savers the possibility to put away money that doesn’t get taxed.

"That draws people to ISAs as they can invest up to £20,000 a year tax free. If you do withdraw that money however, it will become tax-able," Rachel adds.

"Therefore, if people want to move their ISA cash around, they will need to transfer it to another one.”