What is a Lloyds ISA account?
Before we discuss the Lloyds ISA in more detail, we must understand what an ISA is.
An ISA, is an Individual Savings Account which protects your money from tax. The government sets an annual ISA limit at the beginning of each tax year. You can invest up to this limit each year and any interest you earn is tax free.
With a Cash ISA, you’re not risking your returns on the stock market (as you would do with a stocks and shares ISA.) Opening a Lloyds cash ISA is really simple, and can be done with as little as £1. By not paying tax on your interest earned, Lloyd’s cash ISA could make your savings go further.
The Lloyds Cash ISA Saver allows you to earn a higher rate tax-free on balances of £1 or more for 12 months. After this your account with automatically convert to an instant Cash ISA earning slightly less.
How often and how much you pay in is up to you (as long as you don’t go over the ISA limit) and you won’t be charged for withdrawals. Interest is paid once yearly on the 31 March so you may want to time any withdrawals accordingly.
If you can afford to commit your savings for longer, it may be worth looking at the Lloyds Two Year Fixed Cash ISA. This account pays a higher rate of interest tax free on balances of £1 or more. However, while you can withdraw your money during the term of the account, hefty penalties apply. This will amount to losing 180 days of tax free interest on the amount withdrawn.
After the two year fixed period, the account will automatically change to an Instant Cash ISA at a lower rate.
A Lloyds Help to Buy ISA is available for first time buyers looking to buy their own home. This account allows you to earn a much higher tax-free/AER variable on savings towards your first house. You can open your account with up to £1,000. After that, you’ll be limited to depositing up to £200 once per month, though you could also receive a bonus of 25% of your final balance from the government’s Help to Buy scheme. To qualify for this, you need to save at least £1,600 for the minimum bonus of £400, with a maximum bonus of £3,000 available.
When you close the account, your conveyancer or solicitor will apply for the bonus. You should not transfer your savings to another account until you have received confirmation of your bonus.