Best cash ISA rates
This means all interest you earn in your ISA is free of tax - so a cash ISA should always be the first home for your savings.
What’s out there?
When picking an ISA, the first thing to decide is whether you want to fix your interest rate or opt for more flexibility with a variable rate.
If you want to secure the interest rate you earn on your savings, and are happy to lock your money away for a set period of time, then a fixed-rate ISA might be for you.
However, if you want to make additional deposits beyond the upfront opening deposit, or make withdrawals, then a variable-rate ISA is probably more suitable. Just be aware that the interest you earn could decrease in line with the Bank of England's base rate (currently just 0.5%).
Variable-rate ISAs
Santander is offering a Direct ISA paying 2.75% AER - though this includes a bonus for the first 12 months of 2.25%. The deal accepts transfers in from previous tax years, though requires a minimum deposit of £9,000.
Newcastle Building Society is paying 2.75% AER on its Reward ISA for a £500 minimum investment.
The rate includes a 1% bonus payable of the first anniversary. This account allows you to make withdrawals but requires you to give 120 days' notice.
Nationwide also accepts transfers into its e-ISA - this pays 2.67% AER. The rate does include a bonus of 1% fixed until 30 June 2011, but you can open an account from as little as £1. It allows an unlimited number of deposits. There are no withdrawal limits or penalties.
Fixed-rate ISAs
Saga pays 3.75% AER on deposits from £1, with your money locked away for three years - Transfers are allowed.
If a one-year fix is more suitable for you, Aldermore offers a one year fixed rate at 2.85% for balances of £1000 and over, while Principality Building Society pays 2.8% rate on deposits from £1000.
Northern Rock offer a one year fix at 2.8% for balances over £500, or alternatively there is a 3% offer until July 2011 again for balances over £500. No transfers are accepted.
