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Savings & Investments glossary

Mini cash ISA

Mini cash ISAs are tax-free savings accounts designed to encourage those on low incomes to save for their future.

Maxi ISAs are individual savings accounts where people can invest in stocks and shares as well as saving up to £3,000 a year in a cash savings account. This cash element is set to rise to £3,600 from April 2008 onwards.

Mini cash ISAs are a simplified version of this, which only include the cash savings element of an ISA.

Money can be withdrawn from the product without a notice period or penalty charges, and interest earned is tax-free.

Normally any interest earned on savings and investments has tax charged on it at the same rate as a person's income.

While only £3,000 a year (£250 a month) can currently be placed in a mini cash ISA, the entire balance of the ISA (i.e. the accumulated savings of several years) can be transferred into another ISA if needed - allowing Britons to move their savings to get the best rate of interest.

Britons can only put money into one mini cash ISA account a year.

It was announced in early 2007 that the difference between mini and maxi ISA was going to be removed, and that Britons could move money they had saved up in their cash ISAs into a stocks and shares ISA account without it affecting their annual limits.

It was also announced in 2007 that the ISA allowance will rise to £7,200, with the cash element rising to £3,600.


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