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Best cash Isa rates for your last chance to use the 2018-19 allowance
Time is running out to use your £20,000 Isa allowance before the new tax year starts. Which? takes a look at the best cash Isa rates to take advantage of your 2018-19 tax-free savings (and start planning ahead for 2019-20).
The current tax year ends on 5 April 2019, at which point your £20,000 tax-free allowance for 2018-19 will expire and be replaced with a new one for the new 2019-20 tax year.
Even if you don't have a wad of cash to invest, you might have savings elsewhere that could benefit from a tax-free wrapper. Remember, if you don't use your allowance, you lose it.
Here we round up the best instant-access and fixed-rate cash Isas to go for as well as the Isa rules you need to stick to.
The best cash Isa rates for 2018-19
Which? found the top-ratecash Isas across instant-access and fixed-term deals.
Typically, locking up your money for longer will get you a better rate. Right now, however, a four-year fixed-rate cash Isa pays less than a two-year fixed-rate deal.
It's worth pointing out that inflation is currently 1.8%. If you're earning interest than this, your money may be losing value in real terms. To beat the current inflation rate, you would have to lock your money away for at least two years.
| Type | Product | AER | Minimum deposit | Transfers allowed? | Terms |
| Instant-access Isa | Virgin Money Double Take E-Isa Issue 5 | 1.45% | £1 | Yes | Limited to two withdrawals per calendar year (full closure and transfer is permitted following the second withdrawal) |
| One-year fixed-rate Isa | Shawbrook Bank One-Year Fixed-Rate Cash Isa Bond Issue 30 | 1.77% | £5,000 | Yes | Early withdrawal will earn penalty of 90 days' interest. |
| Four-year fixed-rate Isa | Hodge Bank Four-Year Fixed-Rate Cash Isa | 1.80% | £1,000 | No | Early withdrawal will incur penalty of 320 days' interest. |
| Five-year fixed-rate Isa | Shawbrook Bank Five-Year Fixed-Rate Cash Isa Bond - Issue 16 | 2.30% | £5,000 | No | Early withdrawal will incur penalty of 360 days' interest. |
Source: Which Money Compare. Correct 28 March 2019.
Please note that the information in the table is for information purposes only and does not constitute financial advice. Please refer to the particular terms and conditions of the savings account provider before committing to any financial products.
- Find out more: how to find the best cash Isa
What are the Isa rules?
All adults over the age of 16 can save up to £20,000 into an Isa wrapper each tax year. Anything you earn within that wrapper will be tax-free.
You are allowed to put the whole allowance into a cash Isa, stocks & shares Isa or an innovative finance Isa - or you can choose to split it up between different types.
Some types of Isa will have lower limits.The Lifetime Isa, for example, only allows deposits of up to £4,000 a year and the Help to Buy Isa allows £200 a month (£2,400 a year).
While you can have multiple Isa accounts of the same type, you're only allowed to pay into one of each kind in each tax year.
That said, you can sometimes transfer your savings to a new provider (as long as they accept transfers).
So if you opened a cash Isa in 2018-19, but saw a better rate with another provider that allowed a transfer, you could move your balance over. But you'd need to move all of your current year's Isa deposits - you won't be able to split it up.
If the Isa funds you hold were deposited in previous tax years, you can choose to move them altogether or split them up between providers.
- Find out more:cash Isa rules and allowances
Is it worth investing in an Isa?
The main draw of an Isa is that it allows you to hold your savings tax-free, regardless of how big your pot is, or how much you earn.
However, this may have become less valuable since the introduction of the personal savings allowance in 2016. This lets you generate a certain amount of income from any savings account tax-free.
For 2018-19 (and again in 2019-20), basic-rate taxpayers can earn up to £1,000, while higher-rate taxpayers can earn £500 of interest without getting taxed. Additional-rate taxpayers do not have a personal savings allowance.
An Isa will benefit savers with large pots who are likely to exceed their savings allowance, or who earn too much to qualify for it.
The other factor to consider is whether cash Isas have the best interest rates compared to other types of savings accounts.
Right now the top five-year fixed-rate Isa pays 2.30% but the top savings bond pays 2.75% AER.
However, you will need to decide whether the better rate now outweighs giving your cash a tax-free wrapper that it can benefit from for years to come.
- Find out more:personal savings allowance and tax on savings interest
Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Mortgage Advisers and Which? Money Compare are trading names of Which? Financial Services Limited.
