Best cash Isa rates this week

Everyone aged over 16 can save up to £15,240 in an Isa during the 2016/17 tax year.

The benefit of an Isa is that all the interest you earn is free of tax, which is why it should usually be your starting point for savings.

The personal savings allowance means basic rate taxpayers can earn £1,000 interest tax free without using their Isa, and people who pay the 40% rate can get £500.

However, wrapping your money in an Isa means you don't need to worry about a future tax bill because your savings have grown, or if better rates become available. 

The main reason not to use an Isa for your savings is if doing so will eat into the amount you could put into an investment Isa, where the tax relief could save you far more tax, as your investments are likely to grow faster.

Which type of cash Isa do you need?

When picking an Isa, the first thing to decide is whether you want to fix your interest rate or opt for more flexibility with a variable rate.

If you want to secure the interest rate you earn on your savings, and are happy to lock your money away for a set period of time, a fixed-rate Isa might be for you.

However, if you want to make additional deposits beyond the upfront opening deposit, or make withdrawals, then a variable-rate Isa with easy access is probably more suitable.

If you're looking for a savings account to save a deposit for your first property, you might be benefit from a Help to Buy Isa. See our top Help to Buy Isas guide.  

Remember, savings with UK banks are covered by the Financial Services Compensation Scheme (FSCS), so deposits up to £75,000 with any institution are protected by the UK government. If two banking brands (for example, NatWest and RBS) share a banking licence, the £75,000 guarantee is shared across the two brands.

All these savings accounts are covered by the FSCS unless otherwise specified. If your bank is licenced by another European country, savings up to €100,000 will be protected, but by the government where the bank is headquartered, rather than the UK authorities.

Find the best Cash Isa or savings account for you

EASY ACCESS ISAs

  • NS&I pays 1% AER on its Direct Isa, on balances over £1. There’s no limit to how much you can put in the account (subject to the annual subscription limit), and the full balance, not just the first £75,000, is fully guaranteed by the Treasury. The account is available by phone and online.   
  • The Virgin Money: Virgin Defined Access e-Isa pays 0.95% AER on balances over £1. Transfers are accepted, but you can only operate the account online. You're also limited to three withdrawals per calendar year.
  • Coventry Building Society’s Easy Access Isa (Issue 5) pays 0.9% AER. Accounts can be opened with £1, and there’s no maximum balance. The account is available in branch, by post or over the phone. 

 

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NOTICE ACCOUNT ISAs

Notice accounts need you to plan withdrawals in advance, but the rates are slightly higher than instant access in return. Be aware these products are more likely to offered tiered rates, so the interest you get depends on your account balance.

 

FIXED RATE ISAs

FIVE YEAR

 

THREE / FOUR YEAR

  • Hodge Bank’s 4 Year Cash Isa pays 1.3% AER on balances over £5,000, with no upper limit. Accounts can be opened in branch or by post. You can’t make withdrawals during the term, but can close the account early if you’re willing to forfeit six months’ interest.
  • United Trust Bank pays 1.3% AER on balances over £5,000 on its 4 year Cash Isa, with no maximum balance. United Trust Bank only accepts transfers from other accounts, so to get this rate you’ll need to open an account elsewhere and swap it in, or move existing savings. It’s only available by post
  • In the three year market, Virgin Money e-Isa Issue 217 pays 1.25% AER on balances from £1 until 24 January 2020. You can transfer in Isa balances from existing accounts within 30 days of opening the Isa with Virgin Money. Be aware that this account is only available online.

 

ONE / TWO YEAR

  • Aldermore Bank’s 2 Year Fixed Rate Cash Isa pays 1.2% AER on balances between £1,000 and £500,000. It’s available by post, phone or online. You can transfer money from other Isas, but be aware this can only be done at the time of account opening.
  • Leeds Building Society’s 2 year fixed rate Isa Issue 85 pays 1.15% AER fixed until 2 January 2019. The minimum opening deposit is £100 and you are permitted to transfer in existing Isa cash. The account can be opened in branch, by post or via the internet. Withdrawals are allowed but there is a hefty penalty charge of 150 days interest should you choose to do so.

 

JUNIOR ISAS

  • Coventry Building Society’s Junior Cash Isa will pay 3.25% AER. Accounts can be opened with a pound in branch, online or by post. Interest is paid annually on 30 September.
  • Nationwide’s Smart Junior Isa also pays 3% AER. Again, the minimum opening balance is £1. It’s only available in branch. Interest is paid annually on 31 October. 
  • The Halifax Junior Cash Isa pays 3% AER. Transfers in are accepted and the minimum balance is £1. It’s only available in branch.  

 

HOW ARE THESE PRODUCTS PICKED?

We look across as much of the of the savings market as possible to find the best deals using industry data from Defaqto.

All our picks are nationally available. We try and pick products that are available to both new and existing customers, but we’ll highlight some offers for existing customers if they’re much better than what else is on offer.

Unless rates are significantly higher than on other accounts, we avoid products that pay an initial bonus (which is normally a euphemism for a rate cut after 12 months), or those with tiered rates (these may not pay the advertised interest rate if your balance rises above or falls below a set amount).

All these savings accounts are covered by the FSCS unless otherwise specified. If your bank is licenced by another European country, savings up to €100,000 will be protected, but by the government where the bank is headquartered, rather than the UK authorities.

We will never include a savings account that isn’t covered by a European deposit protection scheme.

To see all the savings accounts we consider, visit our savings and Isa comparison tools

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