As the Isa deadline for the current tax year draws closer, banks and building societies are competing to offer savers the most attractive rates on cash Isas. Stash your money in a Best Rate Isa before 5 April in order to make the most of this year’s Isa allowance – and start looking now for the best place to put your 2011/12 Isa savings.
The top instant access cash Isa
Instant access cash Isas are great for those people who know they might need to withdraw some of their savings during the year. With an instant access deal, your money isn’t tied up and you will be able to get hold of your cash at a time that’s convenient for you.
Right now, the highest-paying Best Rate instant-access Isa is the AA Internet Access Isa. It pays 3.35% AER on balances of £500 and above – so you’ll need a sizeable sum of money to invest before you can open this account. In addition, the account doesn’t accept transfers in from other Isa providers, so you won’t be able to move last year’s savings into this Isa.
You can only operate the AA Internet Access Isa via the internet, so it isn’t suitable for anyone who might want branch or telephone access to their savings. The rate payable on this account also includes a bonus of 1.65%, fixed for 12 months – so if you open this Isa, you’ll need to review your situation this time next year and, if necessary, move your money to make sure it’s still earning a competitive return.
The best Notice cash Isa
Notice cash Isas require savers to give notice of up to 90 days if they wish to make withdrawals. The length of the notice period you might be tied into depends on your Isa provider.
Currently, the top-paying notice cash Isa is the Manchester BS 45 Day Notice Isa. It offers an interest rate of 2.86% on savings, and requires an opening deposit of £1,000.
The rate includes a bonus of 0.85%, payable for 12 months and the account is accessible in-branch and by post. However, this notice Isa offers a lower rate of return than the Best Rate instant access deal on the Which? Money tables – so you may want to consider whether it’s worth committing to a notice period and choose an account that offers easy withdrawals, even if you won’t need to make any.
Top fixed-rate cash Isas
Fixed-rate cash Isas offer savers assurance that they will earn a certain return – whereas instant access and notice Isas come with variable interest rates that may change during the tax year.
However, in return for earning a fixed rate of interest you’ll need to lock your money away for a set period of time. This could be anything from between 12 months and five years, depending on how happy you are to give up access to your cash, and how confident you are that interest rates won’t change during the period of your fixed-rate deal.
At the moment, Northern Rock is offering a table-topping one-year fixed-rate Isa. It pays 3.01% AER on deposits of £600 or more.
Meanwhile, Skipton BS is offering the leading five-year fixed-rate Isa. Its deal pays 4.5% AER on balances of £500 plus.
Both deals – like all fixed-rate savings accounts – will impose a penalty (usually a substantial loss of interest) if you decide to take your money out before the term of the bond expires.
Why save in an Isa?
Individual savings accounts – which is what ‘Isa’ stands for – are tax-free savings vehicles that allow you to put money aside and earn interest without paying tax. Ordinarily, 20%, 40% or even 50% of the interest you earned on your cash savings would be payable to HMRC – but with Isas, you get to keep the lot.
Cash Isas are very popular, and you can invest up to £5,100 in an account this tax year (or up to £5,340 for the next tax year, from 6 April). If you haven’t found the Isa you’re looking for in this article, there are many more listed in our Best Rate cash Isas review – so visit our website to compare them. You can also read more about how Isas work in the Which? Cash Isas advice guide.
Stocks and shares Isas are also available, but are slightly more complicated – and some tax will be payable on the returns your investments earn. You can put up to £10,200 in one this year, or save up to £10,680 in stocks and shares Isas in the 2011/12 tax year. There’s more information about these types of Isas in the Which? Stocks and shares Isas guide.
Budget 2011 Live Blog
The 2011 Budget on 23 March is set to have a profound effect on the British economy – but the measures announced by Chancellor of the Exchequer George Osborne will also influence your individual finances.
Follow the Budget as it happens by taking part in our Live Blog, and get expert, on-the-spot analysis of the Chancellor’s announcements.
Which? Money editor James Daley will be joined by Which? finance experts reporting on the Chancellor’s budget speech as it’s made, plus answering your questions on what the measures he has planned might mean for you.
Sign up now at www.which.co.uk/budgetlive for a reminder to watch our Live Blog on Budget day.