Three bank of interest rate cuts have taken rates down to 5% from 5.75% and savers are still enjoying excellent Cash ISA savings interest rates courtesy of the ongoing credit crunch. However as the UK economy slows towards a possible there will be further cuts in UK interest rates and therefore cash ISA savings rates have started to decline from recent heady rates which in some cases passed 6.5%.

As per my previous articles over the last 9 months, the current interest rate climate still favors fixed rate savings of 2 or more years over instant access accounts as a UK recession could see interest rates sharply lower a year from now.

Selection of the Current Best Cash ISA accounts (July 08)

Financial Institution	Interest Rate	Fixed Period	Minimum £	Comments
Ruffler Bank	6.25%	30 day	£3,600	Have gradually cut their minimum from 15k to 9k and now to 3.6k
Principality	6%	Instant	£1	Keep a sharp eye out for any change in rates.
Nationwide	6.15%	1 year	£1	Longer fixes at same rate available
Halifax	6%	4 years	£500	The rate has been cut from 6.20%
Northern Rock	6.30%	1 year	£500	Probably the safest Place for your money as the bank is now owned by the government. Also offers fixes for 2 and 3 years.
Abbey Direct ISA	6%	1 year	£1	Rate has been cut by 0.25%
Barclays Tax Haven ISA	6.25%	Instant	£1	Includes a 1% bonus for 12months - No Transfer in. rate has been cut from 6.50%. Barclays customer service has proved poor in handling account openings.

Best of the above:

Instant Access

Many Instant access accounts such as Kent Reliance and National Savings have left the table due to the impact of rate cuts. However Barclays re-enters the arena with an excellent 6.25% instant access account. The only problem here is Barclays lack of competency observed in opening accounts, which does not seem to have improved from last years. An alternative would be Ruffler's 30day notice account, as Ruffler do consistently offer a good rate relative to the market.

Fixed Rates

The UK treasury backed Northern Rock bank offers the best cash ISA at 6.30% with multiple fix options of 1, 2 or 3 years. This is a market beater and therefore it may not stay on the market for much longer.

Summary of Cash ISA Rules & Benefits

The CASH ISA accounts are TAX FREE, and do not have to be entered onto any tax returns. The equivalent taxable return on a 6% cash ISA for standard rate tax payers is 7.2%. For higher rate tax payers it is 8.4%.
The income from tax ISA's does not count against many mean tested benefits such as Tax Credits.
The Allowance for 2008-09 is £3600.
You can only open ONE New cash ISA per tax year, and you can add new monies to One Cash ISA per tax year (see transfers).
You do not have to open a Cash ISA with your existing provider, i.e. you can open an account at different providers every year.
Most providers allow for transfers in. And ALL should allow you to transfer out.
Once you withdraw from a Cash ISA you cannot then then re-deposit into. The £3600 limit refers to total deposited, and not maximum account balance. So if you deposit £3600, and withdraw £1000, then you cannot re-deposit that £1000 in the same tax year as you have used up your £3600 deposit limit.
To maximize your tax free interest, it is best to open your account at the start of the tax year.
Ability to transfer Cash ISA monies into Shares ISA's but NOT from Shares ISA's to Cash ISA's.

By Shahla Walayat
http://www.moneyforums.co.uk

Moneyforums.co.uk is a FREE site which provides UK Money Saving Guides, Tools and Forums including - Credit Score Calculator and the Savings Calculator . Mortgage and Tax Calculators. Money Saving Guides such as Credit Card Stoozing , Savings Tree , Money Saving Guide. Personal Finance Discussion Forums open to ALL, supported by experienced moderators, to discuss any personal finance topics from The best Savings & Deposit Accounts , Regular Savers and Cash ISA's and more.

This article maybe reproduced if it is reprinted in its entirety with links to http://www.moneyforums.co.uk

Disclaimer - Moneyforums.co.uk does not guarantee the accuracy of the information provided, and does not accept any liability for its accuracy, which is for general information purposes only as a starting point for your own research.

Shahla Walayat Archive

Only logged in users are allowed to post comments. Register/ Log in

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.