The beginning of the 2013/14 tax year means you have a whole new tax-free ISA allowance to use. You can invest up to £5,760 tax-free in a cash ISA, and the same amount in a stocks and shares ISA, or you can invest the full £11,520 allowance in stocks and shares.
The sooner you use your ISA allowance, the more money you will keep from the taxman.
Kevin Mountford, head of banking at MoneySupermarket.com said: “Those who invest the full cash allowance at the start of the new tax year will be able to take advantage of the tax benefits for the entire year, ensuring they get the best returns on their savings."
Here’s our round up of some of the best cash ISA accounts available for 2013/2014…
Best variable rate ISAs
If you think you might need to get your hands on your ISA savings at any point, you should consider an easy access or notice cash ISA.
However, the interest paid on these accounts is usually variable, and many accounts include a hefty bonus in the rate, so you must be prepared to move your savings once the bonus period ends.
The market leading variable rate ISA is the Coventry Building Society Poppy ISA which pays 2.60% tax-free. It includes a 0.60% bonus for 12 months and guarantees to pay at least 2.60% until April 5, 2014. It requires a minimum deposit of £1 but you can't transfer in existing ISA funds. Coventry Building Society promises to donate the equivalent of 0.10% of the average balances invested to the Royal British Legion.
Alternatively, the Leeds Online Bonus ISA pays 2.55% tax-free. It includes a bonus of 1.25% until April 30, 2014, so after this you'll need to find a new home for your money. The account can be opened with £1 and transfers from existing ISAs are accepted.
If you have a Nationwide FlexAccount, FlexDirect or FlexPlus current account, you can apply for the Nationwide Flexclusive ISA which pays 2.50% . The rate includes a 1.00% bonus until the end of November 2014 and you can open the account with £1. However, you can't transfer in funds from existing ISAs.
Other cash ISAs paying competitive returns include Cheshire Building Society’s ISA Saver (Issue 3) which pays 2.30% annual interest tax-free on a minimum investment of £1,000. Transfers from existing ISAs can be made into this account. This rate includes a steep 1.80% bonus which is payable until the end of October 2014, so again you will need to move your money once this disappears.
Savers can also earn 2.30% with Barclays' Instant Cash ISA Issue 1, which again accepts transfers from existing ISAs. However, this rate is only payable on balances of £30,000 or more. For balances less than this, a lower tiered rate will apply, starting from 2.10%. The rate includes a 0.80% bonus for the first 12 months.
Tesco Bank’s Instant Access Cash ISA also pays 2.30%, but the minimum investment is £1. This account has a bonus of 0.30% for the first 12 months, and transfers in from previous ISAs are not allowed.
Consider fixing for guaranteed returns
If you want your savings to earn a guaranteed interest rate for a set period of time, you may want to consider a fixed rate ISA. However, make sure you can afford to tie up your savings for the fixed rate term, as you cannot usually make withdrawals.
Halifax is currently offering market-leading fixed rate ISAs over five, four and three years, with its ISA Saver Fixed accounts over these terms paying 3.10%, 3.05% and 3.00% tax-free respectively. Each of these accounts can be opened with a minimum investment of £500 and can be operated online, in branches, or by telephone. No withdrawals are allowed, although you can close the accounts early if you need to. However, doing this will result in you losing 365 days’ interest with the five-year account, 320 days’ interest with the four-year account, and 270 days’ interest with the three-year account.
If you don’t want to tie up your money for this long, Halifax’s one-year ISA Saver Fixed account pays 2.05% on the same minimum investment, while its two-year ISA Saver account pays 2.50%. If you close either of these accounts early, you will lose 90 days’ or 180 days’ interest respectively.
Other competitive shorter term fixed rate cash ISAs include the Leeds Building Society one-year fixed rate ISA which pays 2.45% until the end of April 2014. Available from April 6, you can open the account with £1 but can't transfer funds from existing ISAs. Unusually for a fixed rate account, you can make withdrawals of up to 25% of your initial investment without paying a penalty, so this could be a good option if you want the security of a fixed rate but think you might need to access some of your funds. However, the ISA can only be accessed by post or in branch.
Alternatively, NatWest and Royal Bank of Scotland’s Fixed Rate ISAs pay 2.00% on a minimum investment of £1,000 for a year or 2.25% if you are prepared to tie up your money for two years.
Virgin Money’s Fixed Rate Cash E-ISAs are also worth a look. Its five-year ISA pays 2.75% tax-free on a minimum investment of £1, or if you only want to tie up your savings for three years, you can earn 2.40% tax-free on its three-year account.
Whichever ISA you go for, make sure you invest as near to the start of the tax year as possible. Every day you delay is another day you will be losing interest to the taxman unnecessarily.
Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.