Tax-Free Accounts

Mini Cash ISAs, Maxi ISAs and TESSA only ISAs are all examples of tax-free accounts.

The Government sets limits on how much can be invested each year.

For Mini and Maxi ISAs, the maximum amount of money you can invest in a cash component of each account is £3,000 per year. Once this limit has been reached no more can be invested until the next tax year (April 6th - April 5th). This limit is to reduce after the tax year 2005/2006 to £1,000 per year.

A TESSA only ISA can only be opened with the capital from a maturing TESSA. After which, the maximum amount permitted to be deposited into the account is £9,000 per year. Interest earned from the TESSA cannot be added to a TESSA only ISA. This must be paid into a different account when the TESSA matures.

Advantages

• Tax-Free savings vehicle
• Good rates of interest paid
• Some accounts pay variable interest so if the Bank of England base rate increases - interest paid on the account may increase

Disadvantages

• A maximum of £3,000 only can be invested into an ISA each financial year.
• The Government only permits one ISA to be opened each financial year.
• If Bank of England base rate decreases - interest paid on the account may decrease