Interest rates on cash Isas have plummeted in recent years, but that doesn't mean they're not worth having, even with the introduction of the new Personal Savings Allowance (PSA) which allows most savers to earn up to £1,000 of interest tax-free.

That's because the tax-free interest you earn in an Isa is uncapped and doesn't count towards your PSA. So, as long as your money stays in an Isa wrapper it will stay tax-free even if you earn more than your PSA in a year. 

Getting the best deal

To get the best cash Isa, there are a couple of things you should know.

The top Isas tend to be available to people who already have products with a financial institution or live in certain geographic areas, so have a good look at what your bank and its competitors are offering to suss out what you could be eligible for. 

Here we've rounded up the best instant access, notice and fixed-rate cash Isa accounts widely available to get you started.

Top instant-access cash Isas

These are the top rates on offer if you want to easily get your hands on your cash at any time.

ISA

Rate

Minimum deposit

Bonus

Notes

Access

Paragon Bank Limited Edition Easy Access Isa

1.05%

£1

None

Transfers and new subscriptions.

Online

Virgin Money Defined Access E-Isa

1.01%

£1

None

Transfers and new subscriptions.

Online

NS&I Direct Isa

1.00%

£1

None

New subscriptions only.

Online, phone

Saga Isa Saver*

0.95%

£1

0.90% bonus for 18 months

Transfers and new subscriptions.

Online, phone

*You must be 50 or over to open this account

As you can see, some instant-access accounts come with temporary bonuses. We’ve got no problem with fixed bonuses.

They mean that your interest rate can’t fall below a certain level for a set period. That's not the case with a variable rate bonus though.

Just remember that the interest rate on your account will almost certainly crash once the bonus expires.

Top notice cash Isas

Some accounts require you to give a little warning before you take money out of the account.

Account

Interest rate (AER)

Minimum deposit

Bonus

Notes

Access

Teachers Building Society Cash Isa

1.05%

£100

None

New subscriptions only.

90 days’ notice required for withdrawals.

Post

Charity Bank Ethical 33-Day Notice Cash Isa

0.90%

£250

None

New subscriptions only.

33 days’ notice required for withdrawals.

Post

Top fixed-rate Isas

Let's move onto fixed-rate Isas, which lock up your money for a certain period of time.

With providers slashing rates and the Bank of England indicating that interest rates aren't likely to rise rapidly in the short term it may be worth locking in now before they fall even further.

Here are the best buys ordered by interest rate.

Account

Interest rate (AER)

Minimum deposit

Length of fixed rate

Notes

Access

Virgin Money Fixed Rate Cash E-Isa

1.65%

£1

Five years

Transfers and new subscriptions.

Online

Hodge Bank 4 Year Fixed Isa

1.30%

£5,000

Four years

Transfers and new subscriptions.

Post

Leeds Building Society 3 Year Fixed Rate Isa

1.30%

£100

Three years

Transfers and new subscriptions.

Online, branch, post

Darlington Building Society Fixed Rate Cash Isa

1.25%

£1,000

Two years

New subscriptions only.

Branch, post

Al Rayan Bank 12 Month Fixed Term Cash Isa

1.09%*

£1,000

One year

Transfers and new subscriptions.

Online, branch, post, phone

*Expected profit rate

Rates have been coming down consistently in recent years, so there’s a strong argument for fixing for five years before rates fall much further. The only risk you run here is missing out on a potential rate rise before your fixed-rate period is up.

Isa options

You can save some or all of your annual ISA allowance, currently £15,240 in the 2016/17 tax year, in a cash Isa and earn interest tax-free.

But you also have the option of putting some or all of your allowance into a stocks & shares Isa.

For the first time you can also put money in an Innovative Finance Isa, which launched this year to keep returns on investments made via peer-to-peer loans tax-free. Lending Works recently launched the first one offering an impressive 4.7% potential return.

If you're saving for a home you could also open a Help to Buy Isa.

A word on inflation

No short-term or long-term cash Isa matches the current annual inflation rate of 1.8%. So if you want your income to beat the cost of living you're better off looking at high-interest current accounts like the TSB Classic Plus account, which pays 3%.

Compare interest-paying current accounts