Should you get a Cash ISA or a savings account?
ISAs remain a good way to reduce your tax payments and interest rates have improved, particularly on easy access ISAs.
As you can only set up one new Cash ISA a year, it's important to pick the best one for your situation.
Are Cash ISAs still worthwhile?
This year's ISA subscription limit is sitting at £20,000. It can be invested in a Cash, Stocks and Shares, Lifetime ISA and/or an Innovative Finance ISA.
Some might think there’s no point in saving into a Cash ISA anymore.
The Personal Savings Allowance (PSA) means you can earn up to £1,000 tax-free interest from any savings or current account, effectively negating the ISA's unique selling point.
You could potentially use standard savings accounts with much better interest rates.
But the humble Cash ISA still holds two attractive features for long-term savers.
It doesn't count towards your PSA and it's open to all savers.
Unfortunately, the PSA is not an option for additional-rate taxpayers and is capped at £500 for higher-rate taxpayers.
Of course, you could potentially earn a far better return and keep the tax-free benefits by investing in a Stocks and Shares ISA instead.
Yet not everyone is happy taking on the risk of investing in the stock market, while others might prefer a combination of the two.
Compare savings accounts, ISAs, and peer-to-peer investments (capital at risk)
Top instant-access Cash ISAs
These are the top rates on offer if you want to easily get your hands on your cash at any time.
|
ISA |
Interest rate (AER) |
Minimum deposit |
Bonus |
Notes |
Access |
|
1.36% (expected profit) |
£50 |
None |
Accepts transfers from Cash ISAs |
Online, branch, telephone |
|
|
1.31% |
£1 |
None |
Accepts transfers from Cash and Stocks and Share ISAs |
Online |
|
|
Bath BS Instant Access |
1.25% |
£1 |
None |
Accepts transfers from Cash ISAs |
Branch or post |
|
1.25% |
£1 |
Nine |
Accepts transfers from Cash, Lifetime, Stocks and Share and Help to Buy ISAs |
Online |
*Two withdrawals permitted per year
Top notice Cash ISAs
Some accounts require you to give a little warning before you take money.
|
ISA |
Interest rate (AER) |
Minimum deposit |
Bonus |
Notes |
Access |
|
Teachers BS Education ISA |
1.40% |
£100 |
None |
90 day notice required for withdrawals. Accepts transfers from Cash and Stocks and Share ISAs. |
Online, post |
|
Paragon Bank 120 Day Notice Cash ISA |
1.31% |
£500 |
None |
120 day notice required for withdrawals. Accepts transfers from Cash and Stocks and Share ISAs. |
Online |
Top fixed rate ISAs
Let's move onto fixed rate Cash ISAs, where you put your money away for a certain period of time.
Here are the best buys for each time period.
|
ISA |
Interest rate (AER) |
Minimum deposit |
Length of fixed rate |
Notes |
Access |
|
1.6% |
£500 |
Five years |
Accepts transfers from Cash and Stocks and Share ISAs. |
Online, post |
|
|
1.55% |
£500 |
Five years |
Accepts transfers from Cash, Lifetime, Stocks and Share and Help to Buy ISAs |
Online, branch, telephone, post |
|
|
1.55% |
£1,000 |
Four years |
Accepts transfers from Cash and Stocks and Share ISAs. |
Email, telephone |
|
|
Marsden BS Fixed Rate ISA |
1.55% |
£5,000 |
Three years |
Accepts transfers from Cash ISAs |
Branch |
|
1.50% (expected profit) |
£1,000 |
Two years |
Accepts transfers from Cash and Stocks and Share ISAs. |
Online, branch, telephone, post |
|
|
1.36% |
£1 |
One year |
Accepts transfers from Cash and Stocks and Share ISAs. |
Online |
The longer you lock your money away, the better your rate will be.
The only risk you run is missing out on a potential interest rate rise before your fixed rate period is up.
ISA options
You can save some or all of your annual ISA allowance in a Cash ISA and earn interest tax-free.
But you also have the option of putting some or all of your allowance into a Stocks and Shares ISA.
If you're new to this, you can read the Beginner's guide to Stocks & Shares ISAs for more information.
You can also put money in an Innovative Finance ISA (IFISA), which lets you keep returns on investments made via peer-to-peer loans tax-free.
There are also other options, if, for example, you want to save for your child's future or want to set money aside for retirement.
Take a look at The ultimate guide to ISAs for more information.
Compare savings accounts, ISAs, and peer-to-peer investments (capital at risk)
This article is regularly updated with the latest rate