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This is Money picks our five favourite cash Isas for savers in 2023 – essential reading to help you choose a top savings account for your money.
This top Isa round-up has keeping our readers updated on the best savings deals since 2014 – and is kept up-to-date throughout the year – bookmark it for the very latest developments.
How an Isa works and why you should have one
Each year in April, savers are given a fresh Isa allowance that qualifies for tax-free interest.
For the 2023/24 financial year, starting 6 April 2023 and ending 5 April 2024, the limit is £20,000.
Piggy five: We round-up the best tax-free deals – and it is slim pickings at the moment
You can transfer Isa money whichever way you wish between an investment account to savings account, whereas previously you could only shift it from saving to investments.
Cash Isa rates have been rising, along with non-tax free rates. It is worth opening one to shield money away from the taxman, especially with rates moving upwards.
Isa rules state you can only contribute to one Isa per tax year.
You can also transfer an old Isa for better returns. Here’s a quick guide to Isa saving.
It is possible to switch your current year’s cash Isa if you move the entire amount, but it is far simpler to get your choice right in the first place.
Rates are rising meaning the potential for a tax bill
The cash Isa savings market has seen considerable improvement over the past year off the back of Bank of England rate rises.
The best buy easy-access rates on a tax-free account pay more than 3.5 per cent. It also comes at a time as inflation races higher, leaving all savers with a serious headache.
Many may ask themselves why bother? Especially given that rates on non tax-free accounts are typically higher.
Yet when inflation is raging, it becomes even more important to make sure you are getting as much as you can from your savings.
An Isa is worth having, despite the tax-free savings interest allowance of £1,000 a year for basic rate taxpayers and £500 for higher rate taxpayers.
Essentially, with rates rising, more are likely to face a tax bill on their regular savings.
If you’re a basic-rate taxpayer earning 5 per cent interest, having more than £20,000 in savings will tick you over your PSA – and for a higher-rate taxpayer, that figure is £10,000.
Money sheltered in an Isa will deliver a tax-free income, even above that £1,000 level and if you are building up a long-term pot, you may one day be very grateful for that.
And who knows if the personal savings allowance will be around forever – it is much more likely to disappear than the Isa wrapper.
You may also want to look into stocks and shares version of an Isa – how to choose the best (and cheapest) DIY investing Isa.
Our five favourite Isas:
Cynergy Bank, easy-access, 3.62% [full details]
– Facts: £1 to open
– Transfers in: Yes
– This is Money says: You can only open and manage this account online. Withdrawals can be made online at any time without notice and there are no limitations on the number of withdrawals you can make. Any cash deposited is fully FSCS protected, as are all of the accounts in this list.
Charter Savings Bank easy-Access, 3.65% [full details]
– Facts: £5,000 to open
– Transfers in: Yes
– This is Money says: You’ll need to manage your account online.
Catle Trust Bank, one-year fix, 4.51% [full details]
– Facts: £1,000 to open
– Transfers in: Yes
– This is Money says: You can only open an account online. You are permitted to withdraw the full amount (including transferring to another ISA provider) but this is subject to a loss of interest. The early exit charges for 1 year is 90 days’ interest.
Close Brothers, two-year fix, 4.65% [full details]
– Facts: £10,000 to open
– Transfers in: Yes
– This is Money says: Account must be opened online. If you decide to close or transfer your Isa before ther end of the deal, you must withdraw the full amount and you will be charged penalty interest. For those put off by the minimum £10k required to open the account, Virgin Money is currently paying 4.57 per cent and only requires £1 to get started.
Moneybox, Cash lifetime Isa, 3.5% [full details]
– Facts: £1 to open
– Transfers in: Yes
– This is Money says: For those aged between 18-39 who are either saving up to buy their first home or towards retirement, this is the best paying cash Lisa deal on the market. Save up to £4,000 each tax year and get a 25 per cent government bonus. The deal is only available via its app. This deal is available through Moneybox app. The rate includes a 0.75 per cent fixed bonus for the first year.
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