Basic questions about ISAs

[NearlyPastTheYardarm]

I am new to savings here in the UK, and I have some basic questions about how ISAs work.

1. If I put the maximum money into an ISA now, am I correct that our next chance to add to the total (without incurring taxes) is in April (5th or 6th, I can't remember)? And that I can at that point, therefore, have 2x the max contribution (ie £10680 rather than just £5340) in the account?

1. Is it normal to switch providers every year to get better rates on Cash ISAs? It seems like a tremendous waste of energy.

1. Do you incur the tax on your money / interest when you take it out? Is there a minimum period for which you need to keep it to avoid tax?

1. Does the interest accumulated count towards the next year's maximum contribution?

I,m not an expert but here goes

1. Yes that is Correct

1. Yes - its like everybody else (gas, electric, credit cards etc) they like to keep you on your toes

1. No tax on withdrawal. And no minimum time

1. No

"our next chance to add to the total"

If 'our' means you are in a couple be aware that the cash ISA limit is per person. If there are two of you, therefore, you could take out a cash ISA each now, invest £5340 each and, after April 6th 2012, invest another £5640 each.

A question you didn't ask. Your total contributions cannot exceed the maximum in any one tax year. If you take anything out of your Cash ISA during the tax year, therefore, you cannot replace it if it takes your contributions over the maximum. e.g. if you put £5000 in today and took out £2000 next week you could only deposit a further £340 in your ISA by the end of the tax year. You couldn't deposit £2000.

On switching providers. ISA providers sometimes offer attractive introductory rates which expire after a period of time. Once your money is in an ISA, however, you can often transfer it to another ISA provider within an 'ISA wrapper', maintaining its tax-free status. Come April comparison sites like www.moneysupermarket.com will have tables of Cash ISA deals.

Fantastic. Thank you both.

I have a question - if interest is paid annually, does that mean you don't get any interest if you keep your money in for 364 days, but you do if you keep it in for 365?

You still get the interest. I recently transferred an ISA to a new provider and it was transferred with interest even though we hadn't quite rolled around to the date when it was usually paid. The exception would be if there is any kind of bonus interest payment for leaving your money there fora particular period of time. You'd get your basic interest but not the bonus if you took it out early.