Why do ISA’s help with your tax

If you pay tax, then you will probably not be happy about it! Most people pay tax on money they earn and money they spend on certain things and that can feel really bad. People ate having to give away their money to the government. Obviously taxes are important as public services have to be financed, but there are people who manage to avoid paying tax in some ways. Sometimes these ways are not seen as fair, but there are measures that the government have put in place which can be used.

One way to avoid paying some tax is to save money in an ISA account. Normally all tax payers are charged tax on interest they earn on their savings and investments. This can sometimes remove a significant chunk of the money that they have earned and it can be very frustrating, especially if you are a high level tax payer. In order to encourage people to save, the government have provided some opportunities for tax free savings and one of these is an ISA.

Each person is entitled to save a certain amount of money each year in an ISA account and they will receive their interest each year, free of tax. There are now a big variety of financial institutions who provide this sort of account. They vary in their terms and their rates. For example there are fixed rate cash isas from Birmingham Midshires which will offer over 2% interest for a year, which is very reasonable. However, if you select a variable rate ISA from them when the money is not tied up for three years, you will get just over !% for the first 15 months and then receive less that this afterwards.

It is therefore worth getting an ISA, but you need to consider which would suit you the most. A fixed rate could be better, especially if you are tied in for a certain term, but you may prefer something where you can get easy access to the money even though you will get a lower return.

Only you can decide which option is best for you. You know whether you are likely to need the money or whether you can afford to tie it up for a while. You will be able to compare the different accounts available and see which one gives the best return and decide whether that is something that you think is worthwhile. You may be happy to tie money up for a good return, but you may think that it is not enough and so go for a lower rate but have easier access. You need to decide which will suit your needs the best as well as which will give you the best return.