Better Than Your Piggy Bank – Top 5 ISAs

Saving money each month is something that many of us do, even if it’s just a few pennies here and there. It’s nice to feel that you have something put away for an emergency or for a rainy day, or perhaps you prefer to save for a specific thing, such as a holiday or home improvements. Whatever your saving style, it’s important to put your money in an account which is going to give you a good rate of interest.

ISAs can give you a fair interest rate, although since the recession hit they’re not as great as they used to be. They’re still worth taking advantage of though, as they’re different to other savings accounts and could benefit you hugely in the long run. ISA stands for Individual Savings Account and every British citizen is entitled to have one. It’s not obligatory, of course, but ISAs are different to other savings accounts in that the interest that you earn is not taxable. This means you can earn interest on your savings over a number of years without having to give the taxman a penny.

ISA interest is paid yearly and is calculated from financial year to financial year. This means that the perfect time to set up an ISA is coming up – on 6th April 2015. As the interest you earn is tax-free, you’re only allowed to put a certain amount of money in each tax year, and if you take money out, you can’t always replace it as it’s the amount that goes in, not the balance, which is recorded. For 2015/2016 the ISA allowance is £15,240. For the current tax year, it’s £15,000 and you still have until 5th April to take advantage of this. Even if you can only put a little in, it’s better than nothing.

The new ISA rates for 2015/2016 are yet to be released. If you want to take advantage of your ISA allowance for this coming year then you’ve still got a little time left. Here are 5 of the best ISAs around at the moment:

• Newcastle Building Society offers 2.57% AER variable (incl. 1% bonus) and will accept monthly payments of £1 - £1,250. You only have one month left on this deal, but if you can only pay in up to £1,250 then it may be good to take advantage of the higher rate. However you can only get the 1% bonus if you have paid every month for the whole year, so the rate will be slightly lower, but still reasonable.
   
• Clydesdale Bank offer an ISA which pays 1% on all balances up to £9,000, 1.5% on balances between £9,000 and £24,000 and 2% on balances over this.
   
• Coventry Building Society pays 2.25% AER fixed until November 2018, but only if you stay until then. If you want to leave and open an ISA elsewhere before 2018, then you will get an interest penalty, which is about a third of the rate.
   
• NS&I will pay 1.5% on new balances, which means you can’t transfer money over from another ISA you’ve had previously. However, if you’re saving for the first time then this could be the ideal choice for you. The Post Office pays 1.5% on both new money and ISA transfers, but it may be best to wait and transfer an old ISA when the new tax year begins in order to make the most of your allowances.