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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. Here’s how to find and compare different cash ISAs.
Frequently asked questions
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 2018/2019 it’s £20,000. And plenty of people choose to use it – in fact, as of 2018 we have a massive £270 billion saved up in adult cash ISAs across the UK.
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 a few different types of cash ISA to think about:
- 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
- Help to Buy ISAs are designed to help you save for your first home and come with government bonuses
A recent addition to the range of cash ISAs are Lifetime ISAs, and can be opened by anyone aged 18-39 to save for their first home or retirement. You have to pay a penalty to withdraw for anything else. These offer a government bonus up until you hit age 50. You can save up to £4,000 a year, but this comes out of your overall ISA allowance of £20,000 and you can have a cash ISA and a Lifetime ISA in the same year. You currently can't compare Lifetime ISAs with us.
How do Help to Buy ISAs work?
If you’re saving to buy your first home, these ISAs are worth having because you can 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 bank or building society will pay you interest too. You have to be aged over 16 and a first-time buyer to be eligible for a Help to Buy ISA. If you’re buying with someone else and you’re both first-time buyers, you can both set up a Help to Buy ISA to help you get on the property ladder. You can't have more than one Help to Buy ISA but you can switch providers.
The maximum amount you can save every month is £200. In the first month you can save an additional £1,000. If you can afford to save more than £200 a month, it might be worth considering the Lifetime ISA instead as you can save up to £4,000 a year in one of these.
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.
To qualify for the scheme the home you buy must be priced under £250,000 or £450,000 in London.
By the end of December 2017, 128,328 properties had been bought, with £132 million in bonuses being paid out.
If you already have a Cash ISA, then decide you want to open a Help to Buy ISA to get the government bonus, you can transfer the opening £1,200 from a cash ISA. But you'll need to make sure that the remainder of the money from your cash ISA is transferred into another type of ISA, or that you use a provider who allows you to hold them within the same ISA wrapper.
Check the name of the cash ISA in our comparison to alert you to which are suitable for Help to Buy.
Why might you choose a cash ISA?
Remember, the key point of ISAs is that the interest is tax-free. The introduction of personal savings allowance has meant that you can now earn tax-free interest on ordinary savings accounts. The amount you can earn on your savings tax free depends on your tax band:
- Basic rate taxpayers - £1,000
- Higher rate - £500
- Additional rate £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 (particularly as allowances can change and as interest rates go up, what was originally tax free could become taxable unlike 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 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 type of ISA, you might even lose money.
In short, cash ISAs are a reliable way to earn interest on your savings without paying tax.
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.
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.
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,t 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.
What are flexible ISAs and how do they work?
New, 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. However, not many providers are offering these yet and it’s up to them whether or not to decide to offer this option.
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 a good ISA rate, you need to compare. 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 can even help you look at Help to Buy ISAs. 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.
Compare the different cash ISA rates now.