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What Are The Best Cash ISAs Of July 2022?

Forbes Staff, Contributor

Published: Jul 1, 2022, 10:00am

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If you’re looking for a new home for your savings, a cash ISA could be worth considering as you can earn interest free of income tax and pay in up to £20,000 a year.

Interest rates have been rising since the end of last year, which has given a boost to variable savings rates. These accounts are also flexible when it comes to getting access to your cash. However, variable rates can still go up and down, while some easy access ISAs impose restrictions, so always check.

ISAs are easy to set up and operate, while many are also flexible which means you can replace withdrawn funds without it affecting your annual ISA allowance. You can find more information on how ISAs work and what to look for, below.

Bear in mind, that while these accounts are correct at the date of publication, deals and rates change frequently.

Guides To Banking & Savings

What are the best cash ISAs?

We’ve taken a look at some of the best variable rate cash ISAs currently on the market. The top-paying accounts are changing frequently at the moment however, so always run a fresh search when you are ready to place your cash.

Aldermore 30 Day Notice Cash ISA Issue 12

Interest (gross variable)

1.40%

Minimum opening balance

£1,000

Flexible

Yes

Interest (gross variable)

1.40%

Minimum opening balance

£1,000

Flexible

Yes

Why We Picked It

This online-only cash ISA from Aldermore allows unlimited withdrawals when you give 30 days’ notice. Although you can choose to access your cash immediately, by doing so you’ll lose 30 days’ interest.

You can decide whether your interest is paid into the account monthly or annually.

The minimum opening balance is fairly high at £1,000, but you can transfer funds across from any existing ISAs. It’s also a portfolio ISA, which means you can open more than one type of cash ISA with Aldermore (e.g. fixed and variable) in the same tax year.

As a flexible account, you can replace any money you withdraw without this replacement counting towards your annual ISA limit (so long as you replace the money in the same tax year you withdrew it).

Pros & Cons

Transfer balance from existing ISAs
Choose between monthly or annual interest payments
Flexible

Minimum opening balance of £1,000
30 days’ notice to access funds penalty free

Paragon Triple Access ISA Issue 8

Interest (gross variable)

1.35%

Minimum opening balance

£1

Flexible

Yes

Interest (gross variable)

1.35%

Minimum opening balance

£1

Flexible

Yes

Why We Picked It

Paragon’s Triple Access Cash ISA offers a high interest rate if you can avoid making too many withdrawals. The interest rate drops to 0.25% (variable) if you withdraw funds more than three times in a 12-month period.

Because it’s a flexible ISA, you can withdraw and replace your money without the replacement counting towards your annual ISA limit (providing you replace the funds in the same tax year you withdrew them).

If you save with Paragon, you can open multiple accounts with the bank and spread your tax-free ISA allowance between them as needed. This could make it easier to keep track of your ISA savings.

It can be opened with just £1, or you can transfer funds from another ISA you hold. There’s no limit on how many deposits you can make.

Pros & Cons

Transfer balance from existing ISAs
Open with £1
Interest paid monthly
Flexible

Interest rate falls if more than 3 withdrawals
Higher rates available

Tesco Bank Instant Access Cash ISA

Tax-free p.a./AER variable

1.32%

Min opening balance

£1

Flexible

Yes

Tax-free p.a./AER variable

1.32%

Min opening balance

£1

Flexible

Yes

Why We Picked It

Tesco Bank pays a competitive interest rate on its Instant Access Cash ISA, and you can withdraw your funds at any time with no penalty.

As a flexible account, when you replace the money you’ve withdrawn, this does not count towards your annual ISA limit of £20,000.

Bear in mind the account’s headline AER includes a bonus rate of 1.07%, which is fixed for 12 months. If you keep your money in the account for longer than 12 months, it’s likely you could be earning a higher rate elsewhere.

Interest on the account is calculated daily and paid annually on the anniversary of you opening the account.

Pros & Cons

Transfer balance from existing ISAs
Open with £1
Unlimited withdrawals
Flexible

Interest rate falls after 12 months
Interest paid annually only

Cynergy Bank Online ISA Issue 23

Tax-free p.a./AER variable

1.31%

Min opening balance

£1

Flexible

Tax-free p.a./AER variable

1.31%

Min opening balance

£1

Flexible

Why We Picked It

Cynergy Bank’s Online ISA offers a competitive (variable) interest rate, and you can open an account with as little as £1. The account can also be opened by transferring across the balance of an existing cash ISA, although this must be when the account is first opened.

There’s no limit on the number of withdrawals you can make, or penalties for withdrawing your cash. Interest on the account is calculated daily and paid annually, usually at the end of March.

Pros & Cons

Transfer a balance from existing cash ISAs
Open with £1
Unlimited withdrawals

Not flexible
Interest paid annually only

Marcus (Goldman Sachs) Cash ISA

Tax-free p.a./AER variable

1.30%

Min opening balance

£1

Flexible

Tax-free p.a./AER variable

1.30%

Min opening balance

£1

Flexible

Why We Picked It

This cash ISA offers a competitive rate, and can be opened with just £1. You’ll also have the flexibility to make as many withdrawals as you like without notice or penalty.

The account is designed to be opened and managed fully online, but you can also give instructions over the phone if needed.

Bear in mind that the advertised gross interest rate includes a bonus rate of 0.25%, which expires after 12 months. This means the rate will drop to 1.05% (variable) at the end of this period.

If you already have a cash ISA, you will not be able to transfer the balance over to this account.

Pros & Cons

Open with £1
Manage your account online or by phone
Unlimited withdrawals
Interest paid monthly

Not flexible
Transfers from other ISAs not permitted

What’s our methodology?

We’ve ordered the cash ISAs accounts based predominantly on gross AER (Annual Equivalent Rate) as of July 2022.

The AER includes interest and any bonuses on your savings account across a 12-month period (as well as any potential charges). As the accounts are ISAs, interest is gross which means no tax will be deducted.

To arrive at our Forbes Advisor star ratings we’ve also factored in:

whether the ISA is flexible (more on what this means below)
whether it allows transfers in from other cash or stocks & shares ISAs
minimum opening balance
how easily the account can be managed

We used independent website, Savings Champion for the best deals.

What is a cash ISA?

A cash ISA is a type of savings account that allows you to earn interest free of income tax.

Each tax year, everyone is given an annual ISA allowance which sets the maximum amount that can be paid into a cash ISA tax-free. For the 2022/23 tax year, this stands at £20,000. If you don’t use your full allowance, you’ll lose it – it cannot be carried over into the next tax year which starts on 6 April.

Your full ISA allowance can be invested in cash, or you can choose to pay some into a stocks and shares ISA and/or an Innovative Finance ISA as well.

What is a flexible ISA?

Some cash ISA providers offer a flexible facility that allows you to withdraw and replace money from your cash ISA without it affecting your annual allowance. This is on the condition that you top up your cash ISA in the same tax year the withdrawal was made.

For example, let’s say you had paid £10,000 into your cash ISA this tax year. This would mean you could pay in another £10,000 before 6 April. However, if you withdrew £5,000, a flexible ISA would allow you to pay in a further £15,000 this tax year – the £5,000 previously taken out, plus the remaining allowance of £10,000.

In comparison, if you took money out of a non-flexible ISA and then replaced it, the money you put back in would count against your ISA allowance for the tax year. So in the above example, you’d only be able to pay in £10,000.

Not all cash ISAs are flexible, so check carefully.

What are the different types of cash ISA?

Just like standard savings accounts, you can choose from different types of cash ISA. These include:

Easy access cash ISAs – allowing you to withdraw your money whenever you need it, penalty-free.
Fixed rate cash ISAs – typically offering higher interest rates compared to easy access options. In return, you’ll need to lock your money away for a term of between one and five years. Withdrawing your money early will usually result in a penalty fee.
Notice cash ISAs – requiring you to give a certain number of days’ notice before you can withdraw your cash. ISAs with longer notice periods tend to have better interest rates.

How do you open a cash ISA?

Most banks and building societies offer cash ISAs. One of the easiest ways to open a cash ISA is by filling in the application form online. Depending on the bank or building society, you may also be able to apply over the phone, by post or in branch.

You can only open one cash ISA each tax year. If you’ve opened a cash ISA in the current tax year, you won’t be able to open another until 6 April. But you can still transfer savings from one cash ISA to another.

How do cash ISA transfers work?

If you want to move your cash ISA to a new provider to get a better interest rate, you will need to ask your provider to carry out the transfer for you. If you withdraw the cash from your ISA yourself and reinvest it in a new one, your savings will lose their tax-free status.

To transfer your cash ISA, you will first need to open a new account. The new provider will then ask you to fill in an ISA transfer form and take care of the transfer process for you. Keep in mind that not all ISA providers allow transfers in, so be sure to check when you’re comparing accounts.

You can transfer funds from your current cash ISA as well as ISA funds from previous years. For ISA money from previous years, you can transfer all or part of your savings. For ISA money invested in the current tax year, you must transfer all of it.

Frequently Asked Questions (FAQs)

What are the potential pitfalls of a cash ISA?

When comparing cash ISAs, it’s important to check whether it offers a flexible facility and whether it allows transfers in if you want to move funds across from an existing ISA.

If you’re looking at easy access cash ISAs, check whether the interest rate includes a bonus that will expire after 12 months. If so, make a note so that you can transfer to a more competitive cash ISA once the rate drops.

If you’re looking for a fixed rate cash ISA, consider how long you are prepared to tie up your funds for. Higher rates usually apply to longer term fixes, but this comes with added risk. Should interest rates rise, you could end up being locked into an account that is no longer competitive (or have to pay a high penalty to get out).

How can I access my cash?

Depending on the provider, you can usually access your cash ISA funds via online banking, the provider’s app, telephone banking or in branch. Remember that if you have a fixed rate cash ISA, you will usually need to pay a penalty to access your funds before the end of the term.

What happens if I exceed my ISA allowance?

If you exceed your ISA allowance, some ISA providers may reject the payment and return it to your original account. If not, you will need to contact HM Revenue & Customs (HMRC) who will advise you on the steps to take.

Is my cash ISA safe?

Yes, if you save with a UK authorised bank or building society, your money will be protected by the Financial Services Compensation Scheme (FSCS). This protects up to £85,000 per person per institution in the event your bank or building society collapses.

If a provider operates on a shared FSCS licence, it means only £85,000 of your cash will be protected in the event you hold more than that sum across different brands under the same banking provider.

Who can open a cash ISA?

You can open a cash ISA if you are aged 16 or over and a UK resident. You must be 18 years or over if you want to open a stocks and shares ISA or an Innovative Finance ISA.

What is the minimum amount I can pay into a cash ISA?

This will vary depending on the provider and the account. Typically, minimum deposits vary between £1 and £1,000 for easy access cash ISAs. Fixed rate cash ISAs could ask for higher minimum deposits, say £2,000 to £5,000.

Is an ISA worth it?

Ever since the introduction of the Personal Savings Allowance in April 2016, cash ISAs have lost some of their appeal.

The personal savings allowance means that all basic rate taxpayers can now earn up to £1,000 of savings interest each year without paying tax on it. Higher rate taxpayers can earn up to £500, while additional rate taxpayers do not get a personal savings allowance.

Despite this, cash ISAs still have a purpose, particularly if you are in a higher tax bracket or you are close to exceeding your personal savings allowance. It is also worth comparing cash ISA interest rates with standard savings account rates to see if they are more competitive.

Can I have more than one cash ISA?

Yes, you can have several cash ISA accounts. But you can only open one cash ISA in each tax year.

What happens to my cash ISA when I die?

If you’re married or in a civil partnership, your spouse or partner will inherit a one-off additional ISA allowance, known as an Additional Permitted Subscription. This is equal to the value of the cash ISA savings held and it won’t affect your partner’s own ISA allowance for that tax year.

If there is no surviving spouse or civil partner, the savings will form part of the estate and lose their tax-free status.

Guides To Banking & Savings

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Bethany Garner Forbes Staff

I’ve been writing for a broad array of online publications for four years, always aiming to make important insights accessible. It’s my goal to ensure that as many people as possible can make informed decisions about their money, and get the most out of their finances with the least amount of stress.

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