Best Isa - Your Guide To The Best ISA's On The Market

best mini cash isa 

best isa explained OK, we've looked at the Maxi ISA and some of the rules, regulations and factors that you need to be aware of before investing your hard earned cash in the markets, and whether this is the best isa for you. This will depend on many factors including your age, your view of risk, and whether you are able to take a long term view of tying up your capital. Now let's look at the sister product, the mini isa, and remember all the rules governing both the maxi and the mini are currently changing which I will explain on the following page.

best mini cash isa explained

The mini isa is very different from the maxi isa in several ways, not least because it can only contain one element. Unlike the maxi isa, it does not give you the option to invest a mixture of cash, stocks and shares or life assurance. So, what exactly can you invest in a mini isa? Well, you still have the same choices as for the maxi isa as follows :

1. Cash

2. Stocks and shares

3. Life assurance

So what is the difference? The difference is that a mini isa can only ever contain one of these. So you can hold a cash mini isa, or a mini isa with stocks and shares or life assurance, but you cannot mix the elements - they must always be held separately. Now a second key difference is that under current rules you can purchase two mini isas in any tax year, as opposed to only one maxi isa. However, if you purchase two mini isas in the same tax year, one must be a cash isa, and the other must be a stocks and shares isa. In other words you cannot purchase two of the same

Now, the next difference concerns the amount that you can invest in a mini isa, which again differs from the maxi isa, which when you think about it is logical. If you buy a mini cash isa, then the maximum allowed is £3,000, and for a mini stocks and shares isa, the maximum is £4,000, which comes to a total of £7,000 as for the maxi isa ( clearly the government would not allow a situation where you could by two mini stocks and shares isas, which would then be £8,000! - everyone would buy these rather then the maxi as it would allow you an extra £1,000 tax free per year, and they are not that stupid sadly!)

So in summary, with the mini isa we can buy two in any tax year, but only one of each type. They can however be from different suppliers so if you like, you can have a cash mini ISA with one company and a stocks & shares mini ISA with another. This is useful, as investment companies, which traditionally offer stocks & shares ISAs, often don't offer great interest rates on cash ISAs. The best cash ISA rates are usually offered by banks and building societies. So, what are the options for a mini isa ? These are as follows :

Option One :    A single mini isa with a maximum of £4,000 in stocks and shares

Option Two:     A single mini isa with a maximum of £3,000 in cash

Option Three : Either or both of the above in any one tax year

 

best isas - mini and maxi summary

I realise that the above can be quite confusing if you are reading this for the first time so in order to try to help clarify things further, I have created a small table below which I hope will highlight the main points. The complication arises from the fact that not only do you need to understand the product itself, each of which have their own rules, but then each type of isa is dependent on the other with another set of rules. My own cynical view is that these rules are made as complicated as possible in order to add some validity to the financial services industry!! In reality, they are not that complex to understand. I hope the following will summarise the main points and make everything very clear!

Rules and Regulations Maxi and Mini Maxi ISA Mini ISA Mini Cash ISA Mini Shares ISA
Same tax year No 1 No - -
Same tax year No No 2 1 1
Different suppliers No & Yes No Yes Yes Yes
Maximum allowed cash per tax year £3,000 £3,000 £3,000 £3,000 No
Maximum allowed  shares per tax year £4,000 £7,000 £4,000 No £4,000

OK, I think that's about it on the maxi and mini isa and I hope the above has helped to explain what you can and cannot buy in each tax year. The rules on topping up are relatively straightforward and I have included a FAQ page on the site which I hope will address most of the commonly asked questions. In simple terms, you can top up the isa throughout the tax year, so for example if you purchased a mini cash isa, you could invest £1,500 at the start of the tax year, and the balance during the remainder of the year ( say £750 and £750 ) in two further amounts. Once the tax year is completed you lose the option to top up, and must purchase a new isa in the following tax year, so any tax saving not taken in the tax year is lost forever and cannot be clawed back.

Similarly if you purchased a mini cash isa at the start if the year with £2,000, and then withdrew some of the cash during the year ( say £500), then the maximum amount you can invest is still £1,000, not £1,500. If no further withdrawals were made and the remaining maximum investment is made, the balance at the end of the year would be £2,500. The total amount of money invested into a mini cash ISA each year is £3,000 regardless of the number of withdrawals made.

Now let's look at the new rules and regulations being introduced in April 2008, and how they will affect the isa market. More importantly, what factors do you need to consider now in order to find the best isa for your money.

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