IF you are looking to get more from your savings you might want to think about opening a cash ISA.
Cash ISAs allow savers to earn tax-free interest on savings – here we look at the best options for 2024.
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With savings rates significantly higher than they have been in the recent past many savers face the risk of paying interest on their savings.
This means that it is more than likely that people will start reviewing their options and looking at moving their money to get a better deal.
According to Sarah Coles, head of finance at Hargreaves Lansdown 2024 could see a “number of decent deals on offer” as banks look to compete for ISA cash.
She said that while savings rates are expected to drop as the market prices in several Bank of England interest rates cuts, savings rates will remain higher than in previous years.
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She said: “There is a very strong chance that rates will remain below 5% on longer-term fixes and one-year fixes and easy access deals could follow them down.”
The finance expert also added that while it might be tempting to go for an easy access ISA giving you a better rate than a long-term fixed that might not be the better option.
She added: “Easy access rates are very likely to keep falling, whereas once you have fixed a rate, it’s guaranteed.”
If the market behaves as it is expected to you will get more for your money in the coming years if you choose a fixed rate.
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What is a cash ISA?
A cash ISA is a type of savings account that offers tax-free interest on your money.
This means you can earn interest on your savings in a bank or building society without paying tax.
There are two types of cash ISAs, easy-access and fixed.
- Easy access – Lets you take out your money when you want without paying a penalty, and the rate you get is likely to change.
- Fixed – Your money is locked in for a certain duration and it pays a fixed level of interest.
The amount you can save is not limitless and is set by the government each tax year.
In the current financial year (2023/24) which ends on April 5, 2024, the limit is set at £20,000.
Savings kept in an ISA will continue to earn interest tax-free until the money is withdrawn from the account.
The best easy-access deals on cash ISAs right now
According to data from Moneyfacts the best savings rate on an easy-access cash ISA is with Teachers BS at 5.25%.
The account requires a minimum investment of £1,000 and the interest is paid yearly.
Make sure that you read and understand all of the terms and conditions of the various accounts as the rules do differ.
The minimum investment on the easy-access deals that we have listed varies from £1 to £1,000 so check with the provider.
Some providers such as Metro Bank and Moneybox also give an intro bonus.
Also, some easy-access accounts have limits on how much money you can withdraw and how often.
Others also require a notice period before you can take your money out.
For instance, the offer from Teachers BS is a 180-day notice period whereas with the Moneybox deal, there is no notice period.
Here are the best easy-access cash ISA deals.
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The best deals on fixed-rate cash ISAs right now
As mentioned previously fixed-rate cash ISAs usually pay a higher interest rate than an easy-access account.
This is because once your money is in, you cannot take it out for a set period of time.
If you do want to withdraw your money early from a fixed-term account you may have to pay a penalty.
Be sure that this type of account is the right choice for you and your money, and read the terms carefully before going ahead.
As with the easy-access deals the minimum investment requirement varies from £1 up to £5,000 in some cases.
The date obtained from Moneyfacts shows fixed 1, 2 and 3 year plus accounts.
Here are the best fixed-rate cash ISA deals.
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How to find the best deal on ISA’s and other savings accounts
It is always good to do your own research to find out what is going to work best for you and your savings.
However, it could get quite time-consuming if you were to look at individual banking sites to compare rates.
Research websites like MoneyFacts and price comparison websites such as Compare the Market, Go Compare and MoneySupermarket will help save you time and show you the best rates available.
These sites let you tailor your searches to an account type that suits you.
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As well as ISAs there are five main types of savings accounts you could choose from.
We have listed them all here to help you understand the differences and narrow down your choices.
