Tax-Free savings: Hunting for the best interest rates
Faith Glasgow on where to go for the top-paying accounts
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.Most of us need a stash of cash, in the shape of a deposit account, to fall back on for treats and emergencies.
Interest rates have dwindled steadily, however. Indeed, with rates hovering around 5.5 per cent before tax (Bristol & West's Easy Access Plus,at 6.20 per cent, is the best of the bunch), it makes a lot of sense to tuck away as much as you can in a tax-free account.
Until 5 April, the obvious choice was a Tessa account. New Tessas are no longer available but the capital (though not the interest) in maturing Tessas can be reinvested within six months after it matures in a Tessa- only ISA.
In the current year, only pounds 3,000 can be invested in a cash-only ISA, so for any CAT-marked product (complying with government guidelines on Charges, Access and Terms) you can keep the account running indefinitely and withdraw money without penalty.
However, while CAT-standard plans are more easily comparable, you'll find a wider range of non-CAT-standard products, including notice accounts, fixed terms and fixed rates.
Keep an eye out, though, for headline rates artificially boosted by initial bonuses. For example, Skipton Building Society pays 6.6 per cent, but that includes a 0.5 per cent bonus that will cease from 5 January next year.
The current best rate of 6.5 per cent on CAT-standard cash ISAs comes from Nationwide on deposits from pounds 1 upwards; Alliance & Leicester and Halifax offer the same rate, but only on the full pounds 3,000 allowance. The top rate is a non-CAT-marked account from Norwich & Peterborough, paying 6.75 per cent on a minimum investment of pounds 3,000 (pounds 1,000 for existing customers).
Once you've used up your pounds 3,000 ISA allowance, the other obvious tax shelter for deposits is National Savings, the government's own range of savings opportunities, several of which are tax-free. Indeed, National Savings has added to its menu with a CAT-standard mini cash ISA, offering 5.75 per cent. It is not the best rate but it is backed by the UK Treasury.
The index-linked saving certificate is a five-year investment paying 1.65 per cent over inflation (currently 2.4 per cent), a total of 4.05 per cent per year tax-free. That equates to 6.25 per cent gross for higher rate taxpayers.
Children's Bonus Bonds, which can be bought for children up to the age of 16, are a useful way for parents to put aside money at a fixed rate. The current annual rate amounts to 4.65 per cent if the bond is held to maturity.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments