Savings update: top cash Isa rates trail taxable accounts
Headline rates on cash Isas continue to lag behind those paid on taxable accounts. On tax-free cash Isas, the top easy access account comes from Post Office Online Cash Isa at 1.51 per cent, including a 0.86 percentage point bonus for the first 12 months.
Virgin Money Defined Access Isa is a slightly better rate at 1.56 per cent, but it limits you to making three withdrawals a year - although there is no bonus on this account. Best deal with no bonus and no withdrawal facilities comes from Nationwide's Instant Isa Saver Issue 3 at 1.4 per cent.
But on taxable easy-access accounts the top deal stands at a higher 1.65 per cent before tax (1.32 per cent after tax) from RCI Bank Freedom Account and ICICI Bank HiSave SuperSaver, with no bonus or withdrawal restrictions.
The same pattern is evident for fixed-rate accounts.
TOP FIXED-RATE ACCOUNTS
On fixed-rate cash Isas Virgin Money pays a top 1.81 per cent for one year, followed by AA Savings' Isa deal at 1.75 per cent, where the deposit taker is Bank of Ireland. Virgin Money pays 2.06 per cent for two years.
But on taxable fixed-rate bonds you can earn at 2.07 per cent before tax (1.66 per cent after tax) for one year with Charter Savings Bank.
French-owned RCI Bank and FirstSave both pay 2.06 per cent (1.65 per cent), while Harrod's Banks now offers 2.03 per cent (1.62 per cent). For two years, top deals include RCI and Hampshire Trust banks at 2.35 per cent (1.88 per cent).
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.