Highlights

• Investors who want to use their £20,000 ISA allowance as early as possible can now earn up to 0.92% with easy-access accounts, a recent analysis claim.
• Easy-access Cash ISAs allow you to withdraw money whenever you want, without any penalty.

Individual Savings Accounts (ISAs) are government-issued investment products that offer a tax-free way to save and invest. It consists of various types of ISAs, each aimed at different types of savers and investors.

If an investor starts contributing to an ISA earlier in the tax year, over the long run, rather than waiting until the last minute can generate more returns, according to an analysis by Interactive Investor, UK’s second-largest investment platform for private investors.  

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A simple calculation on the DIY investment platform shows if an investor would have started investing the full ISA allowance since it was introduced in 1999, into the average IA global fund at the beginning of each tax year the total contribution of £263,440 would have turned into £667,187. Investors who plan to put their money in towards an ISA can very week generate an extra £37,632 rather than making last-minute investment plans next year.

The investors effectively have nine years’ worth of growth: the portfolio would have matured to £629,555.

How Can You Make Withdrawals From An Individual Saving Account?

However, in the same period, if the investor would have invested the full ISA allowance in the average UK fund at the start of a given tax year, it would have generated £23,412 extra, i.e., £510,132 in place of £486,720.

For example- if an investor chooses to invest £20,000 at the start of each tax year for 10 years with a 5% return after charges, they will end up with a portfolio worth £264,136.

Also Read: Ferrexpo, M&G, CMC Markets: Stocks you may shortlist for next year’s ISA 

Best Cash ISA accounts

Investors who want to use their £20,000 ISA allowance as early as possible can now earn up to 0.92% with easy-access accounts, which is more than the average rate of 0.38% and far more than the 0.01% to 0.2% of interest offered by banks.   

Cash ISA can be opened by a person aged 16 or over and works in a similar manner as a normal saving account but with tax-free interests. Taxpayers can earn £1,000 of saving interest a year without paying any tax on cash ISA, but if their earnings are over £150,000, they won’t get any tax allowance. 

There are different types of cash ISAs, which include easy access, Fixed-rate, and others. With easy-access Cash ISAs, investors can withdraw money anytime, without any penalty. However, Fixed-rate Cash ISA offers a guaranteed rate but locks your contribution for a pre-decided period. In case, you want to withdraw money before the fixed lock-in period then you will have to pay some fee or penalty.

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1. Sainsbury’s Bank

Sainsbury’s Bank Cash ISA pays the top standard easy access rate of 0.95% on balances over £500. However, the interest rate that will apply to your account will depend on the balance and the interest will be calculated on daily basis. But the interest will be paid on the anniversary of account opening.

The bank can change the interest rate anytime. If you are aged 18 or over and are a UK resident, you can open Sainsbury’s Bank Cash ISA by applying online. The minimum amount you can deposit in your account is £1 and the maximum is £2,000,000.

You can easily transfer your contributions to another current account with a bank or building society. But if you are making a withdrawal your money will lose its tax-free status.

RELATED READ: HSBC Holdings, NatWest, Lloyds: 3 FTSE stocks you may choose now

2. Shawbrook Bank

Shawbrook Bank’s easy access cash ISA account offers AER 0.92% variable/tax-free interest, with a minimum balance of £1,000. The maximum you can deposit is £250,000 and the interest rate is calculated on daily basis but is paid on the anniversary of account opening. This could be monthly or annually depending on the product you choose. However, it is to be noted that the bank may charge interest rates anytime. Also, you can easily make a withdrawal online at any time without notice.

Also Read: How can you make withdrawals from ISA?

3. Skipton Building Society

Skipton Building Society’s new Bonus Cash Isa offers 0.80% AER variable/tax-free interest, including a 0.10% bonus for the first 12 months. The annual interest rate is earned daily and paid on the anniversary of account opening. You can open Skipton Building Society’s new Bonus Cash Isa if you are 16 or over and can only be opened and managed online.

The minimum amount you can deposit is £1 up to the total ISA allowance each tax year and you can withdraw money easily online but because of security reasons you can withdraw or close the account within the first 14 days of receiving the withdrawal amount.