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Top Cash NISAs 2014/15 2.8% AER cash NISA loophole

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ISAs: They're a piece of cake

New rules mean that everyone over 16 in the UK can now save up to £15,000 in a cash NISA a year - a savings account where you don’t pay tax on the interest. You can get up to 3% and the earlier you save the more you'll earn.

Don't worry if you've opened one in previous tax years, you can open another with whichever provider you choose. If you've already opened one for the current tax year you can top it up to £15,000.

NISA Countdown

If you don't use it, you lose it.

Cash NISA need-to-knows

1 Cash ISAs are now NISAs with £15,000 limit

You've probably heard of cash ISAs, but they don't exist anymore.

For years we've said your money is nicer in an ISA as you can take advantage of the tax relief. But then the Government decided to overhaul and rename ISAs to NISAs (New ISAs).

Yet, apart from a few technical details (and the name change), they look the same. The biggest change is that you can now put more money in - up from the previous £5,940 cash ISA limit.

2 Cash NISAs are NOT complicated

Everyone in the UK over 16 has a £15,000 cash NISA allowance. The allowance can be used to max out your cash NISA or stocks & shares NISA - how you split the money is entirely up to you.

The slate's wiped clean at the beginning of every tax year on 6 April, so even if you opened up one just before the tax year ended on 5 April, you can do it all over again.

And even if you opened a cash ISA at the beginning of the new tax year on 6 April and maxed that out with the full £5,940, you'll now be able to top it up to the full £15,000 if you choose, and it'll all count as your 2014/15 allowance. See full NISA FAQs.

There are easy-access and fixed options, just like normal savings. It's that simple. But for some reason many over-complicate them.

Don't be scared. Ideally, we wish we could hypnotise people so when they read "cash NISA", they actually see:

It's a savings account you don't pay tax on.

Know this and it all becomes clearer. Some people don't have a cash NISA because they believe they have to lock their money away. But it's just a savings account - you don't need to lock cash away if you choose an easy-access account.

Still not sure? It's time for an analogy

For years now - whether on TV, radio or in his book - Martin's used the same analogy to explain NISAs. If it ain't broke, don't fix it, so here come the cakes...

A potential ISA scenario

Quick Q&A on NISA basics:

What happens to the allowance if I haven't used it by the end of the tax year?

Can I make withdrawals?

How many NISAs can you have?

Can I split between a fixed and easy access NISA?

Is my money safe in an NISA?

3 Unlike normal savings accounts, earn £100 in NISA interest, keep £100

The gain is simple. In a cash NISA, you keep the whole amount - that £100 in interest goes straight into your savings pot without even thinking about stopping for the taxman.

This is unlike a normal savings account where, if you earn £100, you'll only receive £80 after basic-rate tax. After higher rate tax, it's £60.

So, as long as rates are similar, NISAs win. This should spell it out:

On £100 interest, higher rate taxpayers keep £60, basic rate taxpayers keep £80, but all taxpayers keep £100 in an ISA

4Cash in a NISA stays tax-free YEAR AFTER YEAR

Cash in a NISA stays tax-free as long as it's in there. The aim's to protect more of your money which is why we nag you about using the full NISA allowance if you can.

If you miss a year now, you might regret it five years later. If you've big savings, you can gradually protect more and more of your cash. Those who started saving when ISAs were first introduced in 1999 could now be sitting on a good tax-free lump sum.

Money in an ISA stays tax-free year after year - you could have £62,000 plus interest now

5 Check rates on old (N)ISAs, as many are pitiful

Savings providers like us to think once our money's in, it's a done deal. This is wrong. You have a right to transfer past years' cash (N)ISAs to the new best buy NISAs - and if you've got serious cash saved in them, this can make a massive difference.

Check rates on (N)ISAs opened in previous tax years. If the rates don't come close to the current best buys, ditch and transfer. It might also be worth consolidating all past (N)ISAs into one new shiny NISA. This makes it much easier to transfer again in the future.

For full pros and cons on this, see the full Cash NISA Transfers guide, though our best buys below detail whether accounts allow transfers.

6 Earn 5% on NISA money now

NISA rates are higher than normal top savings rates, but they are beaten by high rates on some current accounts to persuade you to switch to them.

As many current accounts only allow sub £3,000 worth of savings, it's worth saving in both a current account and a cash NISA if you've got more than that. Alternatively, you can earn 3% with Santander on the full £15,000.

Of course the key is you don’t pay tax on NISAs, so you have to compare it to the after tax rate. Here are the top picks - click the links below for full info on these accounts.

- Santander 123 pays 3% on £3,000 - £20,000. That’s 2.4% after basic-rate tax, and 1.8% after higher rate.
- Lloyds' Club pays 4% on £4,000 - £5,000. For basic-rate taxpayers that's 3.2% after tax, for higher-rate payers it's 2.4%.
- TSB pays 5% on up to £2,000. That's 4% after tax for basic-rate taxpayers, 3% for higher rate.
- Nationwide FlexDirect pays 5% on up to £2,500 for a year, 1% after that. That's 4% after tax for basic-rate taxpayers, 3% for higher rate.

You also need to look at the bigger, long-term picture. Saving in a NISA guarantees tax-free status on that cash for as long as it's kept in a NISA. Interest on a current account is likely to be short-lived. Though in an ideal world, you'd have both. Try this:

First, put cash in a high-interest bank account. As long as the after-tax rate beats your chosen NISA, do this now rather than using your ISA allowance. See Current Accounts for the full options.

Then, use the cash to open a NISA in March 2015. A week before the tax year ends, move the cash out of the bank account to fill your NISA allowance. That way you get the short-term high rate from the banks, but you still get the tax-free benefit of your NISA allowance. See Martin's ISAs vs high-rate bank accounts blog from earlier in the year for full details.

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Top easy-access NISAs - best if you know you'll need access

Easy-access cash NISAs mean you can take out your money when you want it. Once you've taken it out you can't put it back in.

However, there are fixed rates that offer some access so don't plump for an easy access unless you know you need to be able to withdraw the money within the first year.

BM Savings

BM Savings, 1.55% AER incl 1.05% bonus for a year. Apply online or by phone.

  • Rate: 1.55% AER incl 1.05% bonus for a year
  • Min deposit: £1
  • Interest paid: Annually or monthly
  • Allows previous (N)ISA transfers? Yes
  • Transfer out penalties? No
  • Access: Postal
  • Safety: Shared £85,000 UK protection

The ISA Extra account from BM Savings pays a top 1.55% AER rate. It includes a 1.05% bonus for a year, which effectively acts as a rate guarantee. However, once the bonus ends, the rate will be 0.5% so you'll need to transfer in 12 months' time.

You can deposit from £1 up to your annual £15,000 NISA limit at any point during the tax year, plus you can make unlimited withdrawals. Though remember once you've used the full allowance you can't put any money back in until the new tax year starts on 6 April.

The account can be opened online or by phone, though once opened it can be only be accessed by post. You can also choose to have your interest to be paid annually or monthly.

BM Savings

Post Office, 1.55% AER incl 0.8% bonus for 18mths. Apply by post.

  • Rate: 1.55% AER incl 0.8% bonus for a year
  • Min deposit: £100
  • Interest paid: Annually
  • Allows previous (N)ISA transfers? Yes
  • Transfer out penalties? No
  • Access: Branch, post and phone
  • Safety: Shared £85,000 UK protection

The Premier Cash ISA account from Post Office pays a top 1.55% AER rate. It includes a 0.8% bonus for 18mths, which effectively acts as a rate guarantee. However, once the bonus ends, the rate will be 0.75% so you'll need to diarise to transfer in 18 months' time.

You can deposit from £100 up to your annual £15,000 NISA limit at any point during the tax year, however you can only make two withdrawals. If you make more than two you'll either need to transfer or close your NISA. Remember: once you've used the full allowance you can't put any money back in until the new tax year starts on 6 April.

The account has to be opened by post, though once opened it can be accessed in branch, by phone or post. Your interest will be paid annually.

West Brom

West Brom, 1.5% AER For old and new NISA cash. Apply online.

  • Rate: 1.5% AER variable
  • Min deposit: £1,000
  • Interest paid: Monthly or annually
  • Allows previous ISA transfers? Yes
  • Transfer out penalties? No
  • Access: Online
  • Safety: Full £85,000 UK protection

The West Brom Websaver NISA pays a clean 1.5% AER on balances from £1 and is good for those who need regular access to their cash. You can deposit new NISA cash up to the £15,000 limit, and transfer in old (N)ISAs too.

You need to open the account with at least £1,000, but you can make unlimited withdrawals from the account, so the balance can drop to £1 afterwards and you'll continue to earn the high rate. Though, if you withdraw cash from the account you can't put this back in if you've used your full NISA allowance.

The account can be opened and operated online-only and interest is paid annually on 6 April. The interest rate isn't fixed, so keep checking the account. If the rate drops, ditch this account and transfer your cash to a better-paying NISA.

NS&I

NS&I 1.5% AER 100% savings safety. Min £1. No transfers.

  • Rate: 1.5% AER variable
  • Min deposit: £1
  • Interest paid: Annually on 5 April
  • Allows previous (N)ISA transfers? No
  • Transfer out penalties? No
  • Access: Online or by phone
  • Safety: 100% protected - fully Govt backed
1.5,1

The NS&I Direct NISA pays a variable 1.5% AER but it's on new NISA cash only. NS&I protects 100% of your cash, but because you can't transfer old (N)ISAs in, this isn't such a big draw, as all providers protect up to £85,000.

You can save from £1 up to the £15,000 NISA limit, but transfers in of previous years' (N)ISAs are not allowed. If you want an account that lets you transfer in old NISAs, see full options in the Cash NISA transfers guide.

The account can be opened and managed online or on the phone, and it's easy access, so you can withdraw your cash at any time.

There's no bonus on the account, so monitor the rate and be prepared to ditch and transfer if it drops (though NS&I's rates rarely change but do check it regularly). Interest is paid annually on 5 April.

Top notice cash NISA

If you don't need instant access to your cash you can boost your rate slightly with a notice cash NISA. With these accounts you can have access to your cash should you need it, but you'll need to let them know in advance - often a couple months notice.

Market Harborough BS

Market Harborough BS, 1.7% AER 90-day notice. Apply online, by post or in branch.

  • Rate: 1.7% AER variable
  • Min deposit: £1,000
  • Interest paid: Annually only
  • Allows previous NISA transfers? Yes
  • Withdrawal restrictions? Yes
  • Access: Online, post or branch
  • Safety: Full £85,000 UK protection
1.7,1,000

If you won't need immediate access to your cash, you can boost your rate slightly above the instant access NISAs. Market Harborough BS's ISA 90 account pays a clean 1.7% AER on balances from £1,000.

You can make as many withdrawals as you wish, but you'll need to give 90 days notice for each one. Withdrawals can be made in branch, by post or online. But if your withdrawals cause the balance to drop below £1,000, the account will change to an Instant Access NISA which currently pays 1.4% AER - it's not terrible but it can be beaten.

You need to open the account with at least £1,000, plus you can transfer in old (N)ISAs.

The account can be opened and managed online, by post or in branch, and interest is paid annually on 31 March. There's no bonus rate on the account, which means it can drop at any time. Make sure you keep an eye on it and transfer it to a better payer when the rate drops.

Other important options to check

  • Boost the rate if you’ve an HSBC bank account. Existing HSBC customers who have its Premier (a top packaged account option for high-earners) or Advance accounts (or those who switch to them) can get its Loyalty Cash NISA, paying 1.6% or 1.5% AER respectively.

    To keep the rate, you must make a deposit at least every 12 months - if you don't, it drops to 0.5%, although your original rate will return when you make your next deposit.

  • Check local deals near you. Some building societies are giving higher rates on their branch-only NISAs. The Branch Instant NISA from Coventry BS pays a top 2% AER. While you have to open it in branch, you can then manage it online (and by phone or post).

    If you're walking by your local building society, it’s worth popping in to see what branch-only rates they’re offering.
  • Check your credit union. Some credit unions now offer NISAs. For example, Voyager Alliance Credit Union (you must work in transport) has a 2% NISA. Check the Credit Unions guide for more options, and how to find your local credit union.

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Top fixed-rate cash NISAs - even if you need access

Usually, fixed-rate savings are designed to lock money away for a set period. But by law, cash NISA providers MUST allow you access to your money, whenever you want it, though most will levy heavy penalties to do so.

However, a few fixed rates have lower penalties, or allow you some access to your cash. If they pay enough and the penalties are low enough, it's worth getting one, even if you have no intention of keeping it for the full term.

Go for the account that pays you the most over the time you need it. If you want a two-year fix, the best option is currently a four-year account.

All are accessible online, by post and in branches, and allow some form of access. The table below will guide you through when each one is likely to be right for you.

Our table has the top pick for these - the ones that have the smaller penalties. But sadly, neither of these accept transfers. So, we've also included the top rate fixed NISA for each of the time periods you can fix for - though watch out, as some of these have hefty penalties.

Confused by this? Read for full info

Effective rate if withdrawing after (2):
Provider Rate (AER) Fixed Term Allows transfers? Withdrawal penalty: Year 1 Year 2 Year 3 Year 4 Year 5
Top pick deals with low penalties
2.75% (min £1) Until 31 May 2018 No 120 days' interest (1) 1.85% 2.3% 2.45% 2.75% -
2.8% (min £1) Until 24 Oct 2019 Yes 180 days' interest 1.42% 2.11% 2.34% 2.46% 2.8%
Other fixed NISAs (all allow transfers & early access/closure)
2.2% (min £1) Four years Yes 320 days' interest (1) 0.27% 1.24% 1.56% 1.72% -
2.25% (min £1) Three years Yes 120 days' interest 1.5% 1.87% 2.25% - -
2.02% (min £1) Two years Yes 180 days' interest (4) 1.02% 2.02% - - -
1.75% (min £1,000) One year Yes 90 days' interest 1.75% - - - -
(1) Partial withdrawals not permitted - you must close the account. (2) The effective rate will be slightly less if you add more than one lump sum but the accounts will be in roughly the same order as keeping the same amount in there. (3) Assumes full balance is withdrawn and the account is closed. No penalty on the first 25%, 365-day penalty is applied to the remaining closing balance. If only 25% of the capital is withdrawn over five years, you'll get 2.85%. (4) Assumes full balance is withdrawn and the account is closed. No penalty on three withdrawlas at 10% of the balance each time, 180-day penalty is applied to the remaining closing balance.

Top NISA if you want to save each month

You can set up a standing order and save money in an easy-access NISA every month, but special regular saver NISAs often offer a slightly better rate for this.

But remember, the rate is calculated based on money being in the account for a full year. With regular savers, it takes a year to build up to the maximum.

Newcastle BS

Newcastle BS, 2.57% AER Top if you don't want access and can save regularly

  • Rate: 2.57% variable AER
  • Monthly deposit: £0 - £1,250 (penalty if £0/month)
  • Interest paid: Monthly
  • Allows previous NISA transfers? No
  • Withdrawals: No
  • Access: Online, branch or post
  • Safety: Full £85,000 UK protection

If you don't need access the Newcastle BS Big Home Saver NISA pays 2.57% AER for a year, if you deposit £1 to £1,250/month.

The rate is decent if you're looking to save up to £1,250 a month, or, if you've only got a small amount to save you can whack it in here and keep it earning a higher rate for the full year. But if you have a large amount to pay in as a lump sum then you're better off going with an easy access NISA as you'll earn around £25 more if you stick the full £15,000 in BM Savings paying 1.55% than you would if you drip fed it in here.

You must pay in to the account every month, but you can vary the amount you pay in each month. If you miss a payment or make a withdrawal, you'll lose the 1% bonus for that month. The rate will then go back up the following month if you make a deposit and don't make a withdrawal.

A new tax year means a big new NISA allowance We'll tell you how to use it, rate-boosting loopholes and new deals

To see how switching will affect your savings, put the interest into the
NISA Savings Calculator.

Top ethical cash NISAs: Earn up to 2.85% AER tax-free

EthicalConsumerScale

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 to list the top-paying accounts that also rate highly on their ethics.

Easy access

All these accounts have the full UK savings safety protection. See the graph on the right for what Ethical Consumer's ratings mean.

Fixed

NISA Countdown

If you don't use it, you lose it.

Use the net to compare top rates

Fixed rate deals can change regularly. For a full list of fixed rate NISAs, use the MoneySupermarket* comparison (select cash NISAs and then bonds) 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.

The Savings Calculator

When using the calculator below, use the AER (annual equivalent rate) for increased accuracy. It should be listed on your statement. Obviously as most accounts' interest rates are variable, the answers will change if the rate does, so only use the calculator to get a rough indication of your likely outcome.

How much do you need to save? £
How much do you already have? £
How much can you save a month? £
What’s the interest rate? %
How much do you need to save? £
How much do you already have? £
What’s the interest rate? %
When do you need it by? years and months time.
How much do you already have? £
How much can you save a month? £
What’s the interest rate? %
How far ahead do you want to look? years and months time.

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.

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NISA FAQs

Here's a list of the most common queries. If you've got a question we've not answered below, in the text above or in Martin's NISA video below, suggest a question in the forum.

Moving your ISA

I’ve got several NISAs from previous years – can I put them all into one?

If I open a NISA in the current tax year, then the rate drops, can I move it?

Can I transfer my NISA to someone else?

Alternatives to NISAs

Is it even worth saving in a NISA as rates are so low?

Should I offset my mortgage instead of putting cash into a NISA?

Should non-taxpayers bother with NISAs when it makes no difference?

Cash NISAs vs premium bonds - what's best?

Using and accessing your NISA

Can I open a joint NISA with my partner?

What happens to money in a cash NISA if the person has passed away?

Will I get any interest if I haven't had money in the account for a full year?

If I take money out of my NISA, do I then pay tax on it at my usual rate?

Should I use my NISA allowance for cash or stocks & shares?

Cash NISA video Q&A with Martin Lewis, July 2014

Join in the Forum Discussion:
Top Cash NISAs 2014/15
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