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Compare different cash ISAs
An ISA is a flexible way to save, and you don’t have to pay tax on your interest. Since ISAs were introduced, the amount you can put in them has grown and you can now stash a lot of savings away. Comparing cash ISAs is a great way to get a better rate. Here’s how to find and compare different cash ISAs.
What are cash ISAs?
Cash ISAs are essentially tax-free savings accounts. They’re much the same as other savings accounts, except for that all-important tax benefit. Everyone has a personal allowance that they can put in an ISA. For the tax year 2020-2021 it’s £20,000.
Different cash ISAs offer different interest rates and features – which is why it’s so important to compare cash ISA rates before you choose.
What types of cash ISA are available?
There are different types of cash ISA to think about, so it can be hard to find the best cash ISA for you:
- Instant access ISAs let you pay in and take out money whenever you like. However, unless you have a flexible ISA, taking money out will mean that you lose your tax-free allowance on that money
- Fixed rate ISAs offer a fixed interest rate that’s often higher than an instant access ISA, but you have to lock your money away for a set term
- Lifetime ISAs are available to anyone aged 18-39, and can be used to buy your first home, or as a savings pot for retirement. These cannot be compared with Compare the Market.
Why might you choose a cash ISA?
Cash ISAs are a reliable way to earn interest on your savings without paying tax. While the introduction of personal savings allowance has meant that you can earn tax-free interest on ordinary savings accounts, this is limited to:
- Basic rate tax payers – £1,000 interest per year
- Higher rate tax payers – £500 interest per year
- Additional rate tax payers – £0
If you’re earning more than £1,000 in interest each year, and you feel you’re currently paying too much tax on your savings interest, it could be a good idea to shift your money to an ISA. Don't forget, you can maximise both your personal savings allowance and your ISA allowance at the same time, if you can afford it.
Once you’ve decided that you want a tax-free savings account, you could go for a cash ISA or a stocks and shares ISA. Stocks and shares ISAs might make you more money in the long run, but, if you’re not so lucky with the stock market, you could make much less (you can’t compare stocks and shares ISAs with us). Depending on the investment performance of a stocks and shares ISA, you might even lose money.
How to find the best cash ISA for transfers?
Transferring your cash ISA is an easy way to boost your interest rate. Many ISAs have an introductory or fixed-term rate, which is usually the best rate, but this can plummet once that period ends. To make the most of your savings, transferring your cash ISA is a great way to make your money work best for you.
To find the right cash ISA for you, comparing the latest available deals is a great place to start. With Compare the Market, you can find and compare cash ISAs in as little as one minute**. You’ll be able to check the interest rates, as well as any balance limitations, to help you find the right deal for you.
**On average, it can take one minute to complete a savings quote through Compare the Market based on data in May 2020.
How to find the right cash ISA rate?
Normally, the longer fixed-rate accounts offer higher ISA rates. These lock in your funds, restricting your access, but reward you with a higher level of interest.
The type of cash ISA you take out may also affect your rate. Fixed-rate cash ISAs typically offer better interest rates than instant-access ISAs, which usually offer the lowest rates. Regular cash ISAs can offer good rates, but often require a minimum monthly deposit in order for you to qualify for the interest rate.
How to switch ISA provider
If you already have an ISA and want to switch to a different bank or building society that offers a more competitive rate, simply tell your new bank or building society that you’d like to move to them and they’ll organise the transfer for you.
You can transfer ISAs as often as you’d like, which can make switching, to take advantage of introductory rates, the best option. Transferring is relatively simple, taking no more than 15 working days. If you’re transferring to a different type of ISA, you can expect it to take up to one month. Simply get in touch with your new ISA provider and fill out an ISA transfer form.
Make sure you understand any rules your new provider might have about transfers in. Some of them don't allow transfers at all, while others may expect you to do it as part of the opening process within a strict time limit. You can transfer all, or part of any ISA savings you have built up, if you can find a provider happy to accept the transfer. So you may need to shop around.
Don’t just close your ISA and withdraw your cash to open up a new ISA. If you do this, you’ll lose all the tax efficiency benefits and it will limit how much, if anything, you can pay in. If, for example, you had used your full ISA allowance and then closed the account, you wouldn't be able to open another ISA until the next tax year. If it was less than the full allowance, then you would only be able to save up to the remaining amount. Either way, you would waste some or all your ISA tax-free allowance.
Frequently asked questions
How do Help to Buy ISAs work?
The Help to Buy ISA scheme closed on 30 November 2019. From this date, new accounts are no longer available. However, if you have an existing account, or opened one before 30 November 2019, you will still be able to benefit from your Help to Buy ISA until November 2029.
With Help to Buy ISAs no longer available, you might want to consider a Lifetime ISA instead. A Lifetime ISA allows you to save up to £4,000 a year, which is more than the Help to Buy ISA. Lifetime ISAs cannot be compared with Compare the Market.
If you’re saving to buy your first home, you’ll still get a bonus from the government that will boost your savings by 25%. For every £200 you save you'll get a bonus of £50, up to a maximum of £3,000. The maximum amount you can save every month is £200.
If you’re buying with a partner, and they also have an existing Help to Buy ISA, you can combine your savings to help you get on the property ladder. To qualify for the scheme the home you buy must be priced under £250,000 or £450,000 in London.
You need to have saved at least £1,600 to get the bonus. The bonus is paid once it’s certain that the house purchase will go ahead. Your solicitor or conveyancer can help you when it’s time to claim your bonus and close your account. You need to make sure the rules are followed, otherwise you might not be able to claim your bonus.
What do you need to compare cash ISAs?
You don’t need anything to compare ISAs. But you will need some basic personal details to apply, such as your National Insurance number, address, occupation and any current ISA account details you might want to switch into the new ISA.
A lot of cash ISAs are available to apply for online (we’ll show you how to apply for the options we find for you, whether it’s online, by phone, post or if you must go into a branch).
Also, you may need to meet a minimum deposit. This might be £1 or it might be £1,000 – it depends on the ISA you choose. You can easily see what the minimum and maximum limits you can deposit are in our ISA comparison tables.
What are flexible ISAs and how do they work?
Flexible ISAs were launched in April 2016 and these allow savers to withdraw and replace money without the replacement cash counting towards the annual ISA allowance. While these were uncommon initially, their popularity has grown considerably, with significantly more providers offering this type of ISA.
If you think this is a feature you need, then check that the ISA account you want to open offers it.
Why compare cash ISAs with Compare the Market?
To find the right ISA rate for you, comparing the available rates allows you to quickly look at your options. The strongest rates don’t necessarily come from the big banks – you might find a great deal with a smaller online provider you’ve never heard of before.
We can help you compare cash ISAs from a wide range of providers. You can choose from instant access or fixed rate. We’ll give you all your options at a glance in a simple, clear table for easy comparison and highlight the key features of each ISA available.