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This is Money picks our five favourite cash Isas for savers in 2022 – 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 2022/23 financial year, starting 6 April 2022, 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 are 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 rate on a tax-free account pays more than 2.75 per cent, and there are even some in branch options paying more. 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 4.5 per cent interest, having £22,200 in savings will tick you over your PSA – and for a higher-rate taxpayer, that figure is £11,100.
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:
Yorkshire Building Society, easy-access, 2.75% [full details]
– Facts: £1 to open
– Transfers in: Yes
– This is Money says: You can only manage your account online. It requires £1 to open and is fully FSCS protected, as are all of the accounts in this list.
Barclays bank, one-year fix, 4% [full details]
– Facts: £1 to open
– Transfers in: Yes
– This is Money says: It’s a nice change to see one of the larger banks at the top of our best buy tables. You can open an account online, in the Barclays app, in branch or over the phone. It also allows you to make three free withdrawals, each one of up to 10 per cent of your current balance without penalties.
Virgin Money, two-year fix, 4.11% [full details]
– Facts: £1 to open
– Transfers in: Yes
– This is Money says: This is the best two year fix on the market. The account must be opened and managed online.
Gatehouse Bank, three-year fix, 4.2% [full details]
– Facts: £1,000 to open
– Transfers in: Yes
– This is Money says: This rate is the ‘expected profit rate’. The bank monitors the target profit on a daily basis to ensure it is achievable. For every account opened or renewed, Gatehouse will plant a tree in a certified UK woodland project on your behalf.
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.
