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On 6 April a brand new cash ISA year opened— so EVERY UK adult can now put £5,640 in these tax-free savings accounts that pay up to 4.25%. And once in there, the money stays tax free year after year.
Don't worry if you've opened one before, the slate is now wiped clean, so you can open another — with a different provider if you choose. This daily updated guide compares best buys and includes special calculators.
Best buys cash ISAs:
What is an ISA?
For 11 years now whether on telly, radio or in his book, Martin's used the same analogy to explain ISAs. So why stop now? Here come the cakes!
For a more detailed explanation of ISAs, (don't worry it still includes the cakes) see the ISA Guide.
How do Cash ISAs work?
A cash Individual Saving Account (ISA) is just like a normal savings account - you can take cash out whenever you want, the only difference is the interest isn't taxed.
Basic rate taxpayers normally hand over 20% of their savings interest to the taxman, higher rate taxpayers 40% - but in an ISA, you keep that. So basic rate taxpayers earn a quarter more interest at the same rate in a cash ISA, and higher rate taxpayers two-thirds more.
Everyone aged 16 or over can save their allowance in one each tax year (6 April - 5 April) and the real kicker is...
Keep the money in the ISA - it stays tax-free YEAR-AFTER-YEAR.
For the current 2012-13 tax year the annual ISA allowance has been increased to £11,280. However only £5,640 of that may be used for a cash ISA.
Many providers steal your advantage by paying disgustingly low rates like 0.1%, which is why it's important to use the best-buys below to ensure you maximise its use.
However there are many confusions with cash ISAs, so to spell it out....
1. Money may be withdrawn at any time without losing tax benefits
Providing you've picked an easy access ISA, you can withdraw the money whenever you want just like a normal savings account. The key thing to remember is once the money's withdrawn, it can't be returned.
An example should help... say you save £4,000. That leaves you £1,640 left to put in. Then two months later, still in the same tax year, you take out £2,000. You can still ONLY put £1,640 back in.
2. You get a new ISA allowance each tax year
Each tax year (6 April until the next 5 April) everyone aged 16 or over gets a new cash ISA allowance. But if you don't use it, you lose it.
Once that year's closed you cannot put another penny in that specific cash ISA. So if you put in nothing in the 2011-12 year, that's it - it's gone. If you put £2,000 in, even though that year's maximum was £5,340 - the year is closed, you can't now top it up.
Yet if you do put the cash in in time, you can keep it in there, tax-free for as long as you like.
As soon as the new tax year starts on the next 6 April, you can put a whole new year's allowance in.
3. You can have lots of ISAs, but only from different years
The golden rule is you can only open a cash ISA with one provider in a tax year, you can't split it. However you can hold lots of different cash ISAs from different years with different providers.
So if you opened a cash ISA with Barclays two years ago, you don't need to stick with it for this year's cash ISA, you can choose whoever the top payer is.
4. You can transfer ISAs from past years to up the rate
ISA providers love us to think once our money's in, its a done deal. This is wrong. You have a right to transfer past years' cash ISAs to the new best buys - and if you've got serious cash saved in them, this can make a massive difference.
For full pros and cons on this, and which top paying cash ISAs allow you to transfer, see the full cash ISA transfers guide.
5. Make sure your savings are safe
Provided your money is in a UK regulated bank or building society account, it's protected under the Financial Services Compensation Scheme (FSCS). Its golden rule counts for Cash ISAs too...
The first £85,000 per person, per financial institution is guaranteed.
While that sounds simple, the exact rules are more complex - not every bank in the UK is UK-regulated (e.g. ING Direct savings isn't) and there are complex rules involving how different banks are registered and what counts as a financial institution. For full info on the rules see the detailed Are Your Savings Safe? guide.
How to maximise safety
If you've more than £85,000 of savings (including cash ISAs and others) in one bank then, in the unlikely event it went bust, only the first £85,000 is fully guaranteed. So for total peace of mind don't put more than this in any one institution, spread it around.
This guide and best buys
It's impossible to pick "which bank is in trouble?". We've seen great names of world banking like Goldman Sachs and Merrill Lynch in trouble.
Therefore our preferred option is to report the top rates regardless, but let you know if it's not covered by the UK protection.
Ensure you stay protected - keep updated on safety changes Get MoneySavingExpert's free, spam-free weekly email full of guides & loopholes
The UK's Top Rate Cash ISAs
In general, higher interest is better, yet tricks like short-term bonus interest rate hikes, limited withdrawals and transfer penalties abound - so below we explain them.
Most cash ISAs are 'variable rate', meaning providers can change them whenever they decide to, so regularly check the rate's still competitive and if not transfer it.
Alternatively consider the top Fixed Rate Cash ISAs section, plus check branches of smaller building societies, which often have good rates for locals.
Top rates
3.5% onlineAllows transfers
3.3% online-
Nationwide custs
3.5% branch-based -
No bonus accounts
3% clean rate
Top rates - online applications
Cheshire BS, 3.5% AER Postal access. Min £1,000. No transfers
- Rate: 3.5% AER includes 2.5% bonus until 31 October 2013
- Min deposit: £1,000
- Interest paid: Annually only
- Allows previous ISA transfers? No
- Transfer out penalties? No
- Access: Post. Applications online or by phone.
- Safety: £85,000 UK protection shared with Nationwide, Derbyshire and Dunfermline BSs
The Cheshire BS* (part of Nationwide) Direct Cash ISA (issue 2) pays 3.5% AER. It includes a 2.5% bonus until 31 October 2013, so diarise to ditch and transfer. You must make a minimum deposit of £1,000 by cheque.
It doesn't allow transfers in from previous years' ISAs, so if you're after an account to consolidate old ISAs AND add more savings, see the Santander ISA below that accepts transfers.
Cheshire BS is part of Nationwide, so they share the £85,000 UK protection along with Derbyshire and Dunfermline building societies. See more information about the
Savings Safety
rules.
AA, 3.5% AEROnline access. Min £2,500. No transfers
- Rate: 3.5% AER includes 3% bonus for a year
- Min. Deposit: £2,500
- Interest paid: Annually only
- Allows previous ISA transfers? No
- Transfer out penalties? No
- Access: Online
- Safety: Fulll £85,000 UK protection shared with the HBOS group.
The AA's Internet Access ISA (issue 3) pays 3.5% AER. This includes a big 3% bonus for a year so ensure you ditch and transfer after then. You must deposit at least £2,500.
It's for new ISA money only, so you can't transfer in previous years' ISAs.
Any cash saved with the AA is held by the Bank of Scotland, so its £85,000 savings safety guarantee is shared with the HBOS group. See more information about Savings Safety rules.
Santander, 3.3% AER Online, branch or phone access. Min £2,500. Transfers allowed
- Rate: 3.3% AER includes 2.8% bonus for a year
- Min deposit: £2,500
- Interest paid: Annually only
- Allows previous ISA transfers? Yes
- Transfer out penalties? No
- Access: Online, branch or phone
- Safety: £85,000 UK protection shared with A&L, Asda, Bradford & Bingley and Cahoot
The Santander* Direct ISA (issue 9) pays 3.3% AER including a 2.8% bonus for a year on deposits over £2,500. It accepts transfers in of previous years ISAs and allows unlimited withdrawals.
However, if you already have a Santander ISA and are looking to transfer, you must do so in branch or by phone.
It is possible to beat this rate, although only very slightly, and get 3.32% with Natwest if you are transferring over £30,000 of previous years ISA cash - see Cash ISA Transfers for full details.
Santander shares its £85,000 FSCS protection with A&L, Asda, Bradford & Bingley and Cahoot, so if you've more than that saved across all those, the extra isn't protected. See more information about the Savings Safety rules.
Prinicipality BS, 3.1% AER Online. Transfers allowed. Min £1
- Rate: 3.1% variable AER inc 1.3% bonus for a year
- Min deposit: £1
- Interest paid: Annually only
- Allows previous ISA transfers? Yes
- Transfer out penalties? No
- Access: Online
- Safety: Full £85,000 UK protection
The e-ISA (issue 3) from Principality BS pays 3.1% AER including a 1.3% bonus for a year. It accepts transfers in from previous years ISAs.
You can apply for and access the account online only. Unlimited withdrawals allowed, via a linked account. Principality BS has the full £85,000 UK protection. See more information about the Savings Safety rules.
Nationwide FlexAccount customers
Nationwide customers, 3.5% AER Must have its FlexAccount. Branch-only.
- Rate: 3.5% variable AER (inc 1.5% bonus until 30 Nov 2013)
- Min deposit: £1
- Interest paid: Annually
- Allows previous ISA transfers? No
- Transfer out penalties? No
- Access: Branch only
- Safety: £85,000 UK protection shared with Cheshire, Derbyshire & Dunfermline BS
The branch-based Nationwide Flexclusive ISA pays 3.5% AER, including a 1.5% bonus until 30 November 2013. However you must be an active FlexAccount customer and you can't transfer in previous years' ISA money into it.
You'll also be eligible if you switch your bank account to the FlexAccount and pay in £750 a month. See how it compares in the Best Bank Accounts guide.
Nationwide shares its £85,000 UK protection with Cheshire, Derbyshire and Dunfermline building societies. See more information about the Savings Safety rules.
'Clean' no bonus rate accounts
'Clean' rate accounts don't include a short term rate hike like bonus ones. However that doesn't mean you're guaranteed to get the advertised rate forever —they are still variable and could drope (or rise) at bank's whims (read Martin's Savings Bonuses blog).
Marks & Spencer, 3% AER Post/phone access. Transfers allowed. Min £100
- Rate: 3% variable AER
- Min deposit: £100
- Interest paid: Annually only
- Allows previous ISA transfers? Yes
- Transfer out penalties? No
- Access: Post or phone (applications can also be made online)
- Safety: Full £85,000 UK protection
The Advantage Cash ISA from Marks and Spencer pays 3% AER. It's a 'clean' rate, so doesn't include a short-term bonus. It accepts transfers in from previous years ISAs and you can save from £100.
You can apply online, by post or phone. once opened it can only be accessed by post or phone.
Marks and Spencer has the full £85,000 UK protection. See more information about the Savings Safety rules.
Virgin, 2.85% AER Online access. Min £1. Transfers allowed
- Rate: 2.85% AER
- Min. Deposit: £1
- Interest paid: Annually or monthly
- Allows previous ISA transfers? Yes
- Transfer out penalties? No
- Access: Online
- Safety: Shared £85,000 UK protection with Northern Rock
Another 'clean' rate account is the Virgin* Easy Access Cash E-ISA which pays 2.85% AER on balances over £1. It allows transfers of previous years' ISAs and interest is paid annually or monthly.
Although it's branded Virgin, the account is operated by Northern Rock, and currently uses Northern Rock's £85,000 protection. In Jan 2012 Virgin bought Northern Rock's savings arm, and later in 2012 the protection will be merged, so be careful if you have more than £85,000 across both.
Full details in the MSE News story and for more information about the Savings Safety rules.
To see how switching will affect your savings, use the ISA Savings Calculator and input the interest.
Top ethical variable rate cash ISAs
Ethical savings accounts - where providers behave ethically in terms of the environment, human rights and more - have jumped in popularity. Our main focus always is telling you the top savings rates, but to match demand we've worked with Ethical Consumer magazine to list the top-paying accounts that also rate highly on their ethics.
Ethical ISAs: Earn up to 3.5% AER tax-free
All the accounts below have the full UK savings safety protection. See the graph on the right for what Ethical Consumer's ratings mean.
-
2% AER - most ethical but NO UK PROTECTION
The Triodos Online Cash ISA pays 2% AER variable (min £10), and you can transfer in previous years' ISAs. However, you must give 33 days' notice to withdraw cash.
However, it DOES NOT have UK savings protection. If it went bust, you're reliant on the Dutch compensation scheme for your cash - read more in our Are Your Savings Safe? guide.
Ethical Consumer score: 15.5 out of 20. -
3.5% AER- highest paying ethical account.
One of the top picks is also ethical. Cheshire BS's*Direct Cash ISA (issue 2) pays 3.5% AER incl 2.5% bonus until 31 Oct 2013. Min deposit's £1,000. You can't transfer in old ISAs.
Ethical Consumer score:12.5/20.
The Top Fixed Rate Accounts
If you're willing to lock your cash away there are some alternatives which guarantee a decent rate for a set period of time. Yet do remember...
Fixed rate ISAs give a guaranteed rate for a set period, but you will face severe penalties if you try to take money out during that time.
Therefore they're mainly suitable for those happy to lock cash away for the entire term - meaning you lose the flexibility to ditch and switch to a better payer if the rate is no longer competitive.
The Best One Year Fixed Rates
If you want to lock away your cash, you can opt for a fix and get a better rate on a one year fixed ISA than the top easy access accounts above.
Saga 3.6% AER - for over-50s
From £1. Postal.No transfers.
- Product & link: Saga Fixed Rate ISA
- Rate: 3.6% AER
- Length of fixed deal: 1 year
- Min deposit: £1
- Access: Post
- Allows transfers from previous years? No
- Withdrawal penalty: 90 days' interest
- Savings safety: £85,000 FSCS protection, shared with HBOS group
If you're aged 50 or over, you can get the Saga Fixed Rate ISA paying 3.6% AER for a year. You can save from £1, but transfers of previous years' ISA money are not allowed. You can apply for and access the account by post.
Saga shares its £85,000 UK savings safety guarantee with the rest of the HBOS group, including Halifax, AA Savings and Birmingham Midshires. See more information about the Savings Safety rules.
Santander 3.5% AER
From £2,500.Apply in branch. Allows transfers
- Product & link: Santander Fixed Rate ISA*
- Rate: 3.5% AER
- Length of fixed deal: 1 year
- Min deposit: £2,500
- Access: Online/branch/phone
- Allows transfers from previous years? Yes
- CLOSURE penalty: 90 days' interest
- Savings safety: £85,000 FSCS, shared with A&L, Asda, Bradford & Bingley and Cahoot
The Fixed Rate ISA from Santander* pays 3.5% AER for a year. You can save from £2,500 and can also transfer in money from previous years' ISAs. It can be operated by phone or in branches and can be viewed online. Interest will be paid annually.
Plus, additional deposits are allowed between 6-14 April 2012. So if you opened this before 6 April, you'll also be able to deposit the 2012/2013 allowance of £5,640 if you have the extra cash.
Santander shares its £85,000 savings safety protection with A&L, Asda, Bradford & Bingley and Cahoot, meaning if you've more than that saved across all those banks, the extra isn't protected. See more information about the Savings Safety rules.
Aldermore 3.3% AER From £1,000. Online, phone or post. Transfers allowed.
- Product & linkAldermore Fixed Rate Cash ISA
- Rate: 3.3% AER
- Length of fixed deal: 1 year
- Min deposit: £1,000
- Access: Online, phone or post
- Allows transfers from previous years? Yes
- Savings safety: Full £85,000 FSCS protection
- Withdrawal penalty: 120 days' interest
The one-year Fixed Rate Cash ISA from Aldermore pays 3.3% AER on balances over £1,000. It also accepts transfers in of previous years' ISAs. The account can be opened online and operated online, by phone or post.
Aldermore has the full £85,000 UK savings safety guarantee. See more information about the Savings Safety rules.
The Best Two Year Fixed Rates
If you want to lock your cash away for longer, other length deals are available, yet in the current climate there's little guidance on where rates will be in a few years' time. If you choose to lock your cash away for several years now, fixed rates could improve, meaning you'll be locked into a non-top pick account.
Santander 4% AER
From £1. Apply in branch. Allows transfers
- Product & linkSantander Fixed Rate ISA*
- Rate: 4% AER
- Length of fixed deal: until 1 May 2014
- Min deposit: £1
- Access: Online/Branch/Phone
- Allows transfers from previous years? Yes
- CLOSURE penalty: 120 days' interest
- Savings safety: £85,000 FSCS, shared with A&L, Asda, Bradford & Bingley and Cahoot
The Fixed Rate ISA from Santander* pays 4% AER until 1 May 2014. You can save from £1 and can also transfer in money from previous years' ISAs. It can be operated by phone or in branches and can be viewed online. Interest will only be paid annually.
There's an added gimmick giving the chance to earn an extra 0.1% interest, but it's dependent on Rory McIlroy winning a major golf tournament. So don't factor this into your decision - even without this bonus, the rate is still top.
Santander shares its £85,000 savings safety protection with A&L, Asda, Bradford & Bingley and Cahoot, meaning if you've more than that saved across all those banks, the extra isn't protected. See more information about the Savings Safety rules.
Halifax 3.7% AER
From £500. Online, phone & branches. Allows transfers
- Product & linkHalifax ISA Saver Fixed*
- Rate: 3.7% AER
- Length of fixed deal: 2 years
- Min deposit: £500
- AccessOnline/Branch/Phone
- Allows transfers from previous years?Yes
- CLOSURE penalty:180 days' interest
- Savings safety: Full £85,000 FSCS protection, shared across HBOS group
The ISA Saver Fixed from Halifax* pays 3.7% AER for two years. You can only make one deposit which needs to be at least £500 and can also transfer in money from previous years' ISAs. It can be operated by phone or in branches and can be viewed online. Interest can only be paid annually.
Halifax shares its £85,000 UK saving safety guarantee with the rest of the HBOS group. See more information about the Savings Safety rules.
The Best Three Year Fixed Rates
If you're happy to lock your cash away for longer, slightly higher rates are available. There isn't much guidance on where rates are heading, so if you choose to lock your cash away for several years now, fixed rates could improve, meaning you'll be locked into a non-top pick account.
Halifax 4% AER
From £500. Online, phone & branches. Allows transfers
- Product & linkHalifax ISA Saver Fixed*
- Rate: 4% AER
- Length of fixed deal: 3 years
- Min deposit: £500
- AccessOnline/Branch/Phone
- Allows transfers from previous years?Yes
- CLOSURE penalty:270 days' interest
- Savings safety: Full £85,000 FSCS protection, shared across HBOS group
The ISA Saver Fixed from Halifax* pays 4% AER for three years. You can only make one deposit which needs to be at least £500 and can also transfer in money from previous years' ISAs. It can be operated by phone or in branches and can be viewed online. Interest can only be paid annually.
Halifax shares its £85,000 UK saving safety guarantee with the rest of the HBOS group. See more information about the Savings Safety rules.
Marks & Spencer 3.75% AER From £500. Post or phone. Transfers allowed.
- Product & linkMarks & Spencer Fixed Rate Cash ISA
- Rate: 3.75% AER
- Length of fixed deal: 3 year
- Min deposit: £500
- Access: Post or phone
- Allows transfers from previous years?Yes
- Savings safety: Full £85,000 FSCS protection
- Withdrawal penalty: A charge of £100 applies for early withdrawals
The three year Fixed Rate Cash ISA from Marks & Spencer pays 3.75% AER on balances over £500. It also accepts transfers in of previous years' ISAs. The account can be opened online, by post or phone, but can only be operated by post or phone.
Marks & Spencer has the full £85,000 UK savings safety guarantee. See more information about the Savings Safety rules.
The Best Four Year Fixed Rates
If you're happy to lock your cash away for four years higher rates are available. There isn't much guidance on where rates are heading, so if you choose to lock your cash away for several years now, fixed rates could improve, meaning you'll be locked into a non-top pick account.
Halifax 4.15% AER
From £500. Online, phone & branches. Allows transfers
- Product & linkHalifax ISA Saver Fixed*
- Rate: 4.15% AER
- Length of fixed deal: 4 years
- Min deposit: £500
- AccessOnline/Branch/Phone
- Allows transfers from previous years?Yes
- CLOSURE penalty:320 days' interest
- Savings safety: Full £85,000 FSCS protection, shared across HBOS group
The ISA Saver Fixed from Halifax* pays 4.15% AER for four years. You can only make one deposit which needs to be at least £500 and can also transfer in money from previous years' ISAs. It can be operated by phone or in branches and can be viewed online. Interest can only be paid annually.
Halifax shares its £85,000 UK saving safety guarantee with the rest of the HBOS group. See more information about the Savings Safety rules.
The Best Five Year Fixed Rates
If you are happy to lock away your cash for five years a higher rate is available. Yet here you are taking an even bigger gamble on rates staying low for a significant period. If UK interest rates recover between now and 2017, you could lose out as your cash is stuck at this rate.
Halifax 4.25% AER
From £500. Online, phone & branches. Allows transfers
- Product & linkHalifax Fixed Rate ISA Saver*
- Rate: 4.25% AER
- Length of fixed deal: 5 years
- Min deposit: £500
- AccessOnline/Branch/Phone
- Allows transfers from previous years?Yes
- CLOSURE penalty:365 days' interest
- Savings safety: Full £85,000 FSCS protection, shared across HBOS group
The Fixed Rate ISA Saver from Halifax* pays 4.25% AER for five years. You can only make one deposit which needs to be at least £500 and can also transfer in money from previous years' ISAs. It can be operated by phone or in branches and can be viewed online. Interest can only be paid annually.
Halifax shares its £85,000 UK saving safety guarantee with the rest of the HBOS group. See more information about the Savings Safety rules.
BM Savings 4.25% AER
From £500. Post only, allows transfers
- Product & linkBM Savings Fixed Rate ISA Saver
- Rate: 4.25% AER
- Length of fixed deal: 5 years
- Min deposit:£500
- Access:Post
- Allows transfers from previous years?Yes
- Withdrawal penalty:365 days' interest
- Savings safety: £85,000 FSCS protection, shared with HBOS group
The fixed rate ISA Saver from BM Savings pays 4.25% AER for five years. You can only make deposits while this issue of the account is open and you can also transfer in money from previous years' ISAs. The account can be opened online or by phone and then operated by post only. Interest can be paid annually or monthly.
Birmingham Midshires shares its £85,000 UK savings safety guarantee with the rest of the HBOS group. See more information about the Savings Safety rules.
Use the net to compare top rates
Fixed Rate deals can change regularly, for a full list of fixed rate ISAs use the MoneySupermarket* (select Cash ISAs and then Bonds) comparison or Moneyfacts. Though remember, they're just a simple list of top rates, so ensure you check for the possible pitfalls noted in this article.
Top ethical fixed rate cash ISAs
Ethical savings accounts - where providers behave ethically in terms of the environment, human rights and more - have jumped in popularity. Our main focus always is telling you the top savings rates, but to match demand we've worked with Ethical Consumer magazine to list the top-paying accounts that also rate highly on their ethics.
Earn up to 3.75% AER fixed, tax-free
All of the accounts below have the full UK savings safety protection. See the graph on the right for what Ethical Consumer's ratings mean.
-
3.25% AER fixed for one year.
Leeds BS pays 3.25% for one year in its 1 Year Fixed Rate ISA (issue 32), min £1. You can't transfer previous years' ISAs in.
Ethical Consumer score: 13 out of 20. -
3.2% AER fixed for two years.
The Skipton BS pays 3.2% AER on its 2 year Fixed Rate Cash ISA, with a minimum deposit of £500. Sadly it doesn't beat the top one year so you'd be best off opting for a one or three year account. Transfers from previous years' ISAs allowed.
Ethical Consumer score: 13 out of 20. -
3.35% AER fixed for three years.
The top three-year account also comes from Skipton BS, paying 3.35% AER on its fixed rate cash ISA (min £500). Transfers from previous years' ISAs allowed.
Ethical Consumer score: 13 out of 20. -
3.75% AER fixed for five years.
The best five-year fixed rate cash ISA (issue 2) comes from Kent Reliance and pays 3.75% AER (min £1,000). Transfers in allowed.
Ethical Consumer score: 13 out of 20.
Many top savings deals are short-lived Get MoneySavingExpert's free, spam-free weekly email full of guides & loopholes
Inflation-beating ISA savings
An alternative to fixing is get an account that gives you a rate guarantee for a certain period. However, the usually you have to lock cash away for up to five years, so only go for it if you are totally sure you won't need access. See full details of all the top accounts in the Inflation-Linked Savings guide
Cash ISAs: Q&A with Martin Lewis
Filmed on 14 March 2011
What about Toisas?
The Tessa-only ISA, tongue-twistingly known as a Toisa, was another special tax-free product. Old style TESSAs, the forerunner of the cash ISA, lasted for five years and then matured. If this occurred any time between 1999 and 2004, the TESSA automatically turned into a Toisa.
Since April 2008, all Toisas have become simple Cash ISAs, meaning all normal ISA rules apply. You can no longer add funds to an old Toisa, but if you have any money left in one, you can transfer it and up the rate see Cash ISA Transfers for the best accounts that let you move money in.
The Savings Calculator
When using the calculator below, for increased accuracy use the AER (Annual Equivalent Rate) which should be listed on your statement. Obviously as most accounts' interest rates are variable, the answers will change if the rate does, so use the calculator as a rough indicator of the likely outcome only.
The calculator assumes you put money in at the beginning of each month, so if this isn't how you do it, the answers will be ever-so-slightly out. If you don't make regular deposits but put in lump sums, figure out the monthly equivalent for a rough answer. Feel free to play with the results to see how your savings are affected.
The size of the saving
A basic rate taxpayer saving £5,640 over three years, in a poor savings account, of which there are sadly many, would earn £14 interest. In a top savings account it's £440, but the same amount in the top cash ISA, as it's tax free, earns £613. Yet not all cash ISAs are the same. One of Halifax's pays a paltry 0.1%, meaning it'd underpay the market leader by nearly £600 interest.
The benefits are even bigger for higher rate taxpayers; then the top cash ISA outperforms the top savings account by almost £400.
Interest Rate | Untaxed | Basic Rate Tax |
Higher Rate Tax |
Additional Rate Tax |
|
|---|---|---|---|---|---|
Poor Savings Account (1) | 0.1% | £17 | £14 |
£10 |
£8 |
Top Savings Account (2) | 3.17% | £553 | £440 |
£328 |
£72 |
Poor ISA (3) | 0.1% | £17 | £17 |
£17 |
£17 |
Top ISA (4) | 3.5% | £613 | £613 |
£613 |
£613 |
Assumes rates are stable (1) Halifax Liquid Gold (2) Nationwide MySave Online (3) Halifax variable rate ISA (4) Cheshire Direct ISA | |||||
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