I have an emergency savings jar in an easy to access old Isa with a low interest rate.
I’m sure I can do better by moving it, so what are the best Isa easy access options at the moment. ?
Do I need to top up the fund to get it accepted by a new Isa provider, or can I just move it?
Tax-free envelope: each tax year you can save or invest up to £20,000 in an Isa
This is Money’s Ed Magnus responds: It’s great that you have an emergency kitty in an easy-to-access savings account, because you can withdraw funds as you need them.
But it’s wise to look for a better rate, as interest on savings is at its highest level in over 10 years.
You can transfer your Isa cash account to a new provider, but you are right to mention the “transfer in” item.
Under current rules, Isa Cash providers must allow outgoing transfers, but there is no requirement to accept incoming transfers. Therefore, not all Isa providers do this.
We take a look at the best interest rates you could get and explain the rules for transferring money from an old Isa to a new one.
– Discover the best easy-to-access cash Isa rates on This is Money’s best buy tables
What are the best Isa easy access rates?
The average easy-to-access money Isa currently pays 1.26%, according to Moneyfacts.
If you are currently earning interest around this level or even less, you should definitely be looking to move your money elsewhere.
There are currently a number of providers who pay more than 2.25%: a whole percentage point more than the average offer. But you can do even better than that.
In terms of the best possible deal, those doing business with Virgin Money, Clydesdale Bank or Yorkshire Bank have access to an exclusive Isa Easy Access Cash offer from Virgin Money paying 3%.
If you want this market-leading rate, you’ll need to set up a free Virgin M Plus checking account.
The Isa cash account allows you to transfer from your current service provider. If you wish to transfer your current year subscriptions, the full amount must be transferred.
Follow the rules: if you transfer from one Isa provider to another during a tax year, it will not affect your annual Isa allowance. Just make sure you follow the correct transfer process
As for other major transactions, there are three building societies: Nationwide, Principality and Scottish Building Society, all of which have transactions paying 2.5% and allowing transfers.
The Principality’s deal includes bonus interest of 0.4 percentage points paid for the first 12 months.
Nationwide’s one-year triple access account comes with a caveat, in that it only allows up to three withdrawals within the 12-month period.
For those who make more than three withdrawals, their rate will drop to 0.75% for the remainder of the term.
The Scottish Building Society 2.5% deal has no such constraints and can be opened with a minimum deposit of £100.
It’s worth pointing out that all of these providers are backed by the FSCS, which means your money will be protected up to £85,000 under the deposit guarantee scheme.
What are the rules when saving in an Isa fund?
It should be noted that you can only have one active Cash Isa each year.
This means you cannot open multiple Cash Isas in a single tax year and receive the Tax-Free Savings Allowance for each of them.
This also means that if your existing Cash Isa was opened in the current tax year, you will need to transfer the entirety of it to the new provider and close the old account.
However, if you are transferring Isa funds made in a previous tax year, you can transfer as much as you want without affecting your current annual Isa allowance.
Regarding the question about the top-up, you don’t need to do that to be accepted by the new supplier.
One important thing to avoid is withdrawing your money from an Isa. If you do, your money will lose its tax-exempt status – so be sure to follow the correct transfer process.
The best way to transfer is to contact the new supplier and complete an Isa transfer form.
Who is an Isa cash for?
Having your easy-access savings in an Isa account means that any interest you earn is tax-free.
That said, it’s worth remembering that if you’re a basic rate taxpayer, you can earn up to £1,000 in interest each year without having to pay tax. If you’re a higher rate taxpayer, you can still get up to £500 in tax-free interest each year.
However, if you are an additional rate taxpayer earning £150,000 or more (falling to £125,000 or more from next April) you do not receive a Personal Savings Allowance, so a cash Isa will have certainly makes sense in these circumstances.
The best non-Isa easy access savings offer is with Al Rayan Bank and pays 2.81%. Someone with £10,000 in this account would earn £284 in interest over the course of a year.
If you’re a basic rate or higher rate taxpayer, that means you wouldn’t have to pay tax on that interest in any given year – unless of course you have the money. generating interest elsewhere, which caused you to exceed the respective limits.
That said, there is little difference between the best non-Isa easy access deals and the best cash Isa easy access deals right now.
By withdrawing funds from your Money Isa, you would lose the tax-free wrapper in the future, which may be a decision you will ultimately regret if interest rates rise.
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