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No time like the present for a tax free gift

No time like the present for a tax free gift

Category: Savings

Updated: 24/09/2010
First Published: 24/09/2010

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 It is now over 6 months old so the content may be out of date.

One of the few success stories in the savings world over the last decade has been the take up of ISAs.

That was particularly true in the first six months of this year, when a number of competitive ISA products saw £3.1 million invested into the accounts – the highest figure for the first half of the year since 2001.

The figures were no doubt boosted by the expansion of the ISA limits.

With savers aged over 50 having their cash ISA annual allowance increased from £3,600 to £5,100 last year, the new limits were rolled out to everybody at the beginning of the 2010/11 financial year.

Many took advantage and ISA limits will now increase in line with inflation from April next year.

But if you didn't quite get round to topping up your ISA this year, or perhaps opening a new ISA account, don't worry, as there's still plenty of time to do so.

The benefits of doing so are clear, especially given the combination of low interest rates and high inflation.

Consumers will also be hit by the rise in VAT from 17.5% to 20% in the New Year.

But a cash ISA will offer some solace as interest is safe from the taxman; a decent rate of interest doesn't hurt either!

Of the best cash ISAs currently available, the ISA Direct Reward from Halifax scores highly.

It requires just a £1 deposit to open, allows unlimited withdrawals and an unlimited number of deposits up to £5,100.

A variable interest rate of 2.80% is paid annually, while Halifax current account customers can get a variable rate of 3.00%.

Customers can manage their savings online or by phone and the account allows transfers in, so it is well worth considering if your current ISA's rate of interest doesn't look quite as appealing in comparison.

If you'd prefer a fixed rate, the Northern Rock ISA Breaker Issue 3 offers 2.85% until 15 October 2011, and it can be opened with an initial deposit of £500.

The account is better suited to somebody looking to open up a brand new ISA, as it does not allow transfers in, while it is worth bearing in mind that once the issue is withdrawn, additional funds must be deposited within 30 days.

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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.