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Cash ISAs

If you’re looking to maximise the return on your savings, why hand over cash to the tax man when you don’t need to? Individual Savings Accounts (ISAs) allow you to save money without paying tax on the interest earned. Every adult is entitled to an annual ISA allowance – currently £5,340 for a cash ISA. Once the tax year is up, you lose the allowance for that year, so it’s worth taking advantage of your cash ISA allowance each year to maximise the return on your savings. It’s also important to remember that you can have several ISAs – one for every tax year – meaning you can build up a decent pot of tax-free savings over time.

How to find the best cash ISAs

Banks are pretty cunning at maximising their profits, sometimes at the expense of customers, so it’s important to know a bit about how cash ISAs work. If you’re looking for the best returns, no doubt you’ll be on the hunt for a

– but there are things to watch out for, like penalties for transferring your money out, and short term bonuses which artificially hike the interest rate.

  • Some of the best cash ISAs offer healthy interest rates and allow transfers from previous year’s ISAs;
  • If you need access to your money at short notice, consider a cash ISA which allows unlimited withdrawals;
  • If you are prepared to lock away your cash, fixed rate ISAs may offer a higher rate of interest;
  • Your current bank won’t necessarily offer you the best deal on a cash ISA – some ISA rates offered by well-known financial institutions are incredibly low, so you should always compare ISA rates.

High interest cash ISAs

The cash ISAs offering the highest interest rates tend to be the five year fixed rate ISAs. Because you agree to lock away your cash for a long period, you’ll get a better return than, say, a 1 year fixed rate ISA. This is fine in principal, but if you need to access your money you may not be able to, or at least you might have to pay a penalty to do so. In addition, longer term fixed rate cash ISAs can be a risk if taken out when the base rate is very low, because savers can find their returns relative to the market diminishing as interest rates rise. Have a look at the top ten ISAs for more information.

Compare cash ISAs

Due to the vast array of different ISA rates and the various types of cash ISA available, it’s vital to do a comparison of the best cash ISAs before you open one. This will allow you to not only compare headline interest rates, but things like closure or withdrawal penalties. Once you’ve decided you want a cash ISA, and have thought through whether you’d like a fixed or variable rate, it’s down to finding the best cash ISA account to fit your criteria. Our free service enables you to do just that, and compare the top cash ISAs from across the market, in minutes.

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