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Cut out the taxman with an ISA

Cut out the taxman with an ISA

Category: Savings

Updated: 18/08/2010
First Published: 18/08/2010

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

It might not to compare the estimated £2.3 million that a certain Tony Blair could save in tax, but an ISA is still one of the most tax efficient ways to save money.

It is thought that by donating his £4.6 million advance on his forthcoming autobiography to a soldier's charity, Tony Blair could be entitled to substantial tax relief.

This is because of the Gift Aid initiative his Labour Government introduced a decade ago, although there is no suggestion that the former Prime Minister stands to gain from his donation.

While not in the same ball park as Mr Blair, you too could lead the taxman in a merry dance by investing your money in an ISA.

Introduced in 1999, they have become the most popular financial product amongst consumers, bar only the ubiquitous current account.

Savers are permitted to invest up to £5,100 into cash ISAs each year, with many of the accounts now allowing previous years' balances to be transferred in.

There are also stocks and shares ISAs, which link the return to the performance of equities

It is probably safe to say that the tax free status enjoyed by interest built up in the accounts has been integral to the accounts' enduring success.

And, in such austere times, when a combination of high inflation and record low interest rates is hitting savers in the pocket, the reach of the ISA is sure to grow.

Recent figures from the Investment Management Association showed that some £3.1 billion was invested into the accounts in the year until June – the highest amount seen since 2001.

Furthermore, sales of ISAs raced to £434 million in June, the most seen in the month since 2000 when Tony Blair was arguably still popular.

If you do not have an ISA or are yet to use your 2010/11 allowance then the Moneyfacts Best Buy tables are the place to start.

Just another word of advice: it is worth reviewing the terms of your ISA on a regular basis to ensure the rate paid on your money is still competitive.

If your bonus period has expired, or the rate no longer looks so generous, then you should consider switching to one of the many ISAs currently available.

Find the best savings rates for you - Compare savings accounts

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.