Can I transfer the cash in my old Isa to one with a better interest rate? What are the rules?

I have an emergency piggy bank in an old easily accessible Isa with a bad interest rate.

I’m sure I can do better by moving it so what are the best ‘transfer in’ easy access Isa options right now.?

Do I have to top up the fund for it to be accepted by a new Isa provider, or can I just move it?

Ed Magnus of This is Money replies: It’s great that you have an emergency piggy bank in an easily accessible savings account because you can withdraw money as and when you want.

But you would be wise to hunt for a better rate, where the savings rate has been at the highest level for more than 10 years.

You can transfer your money Isa account to a new provider, but you rightly mention the ‘transfer’ element.

Under current rules, Isa cash providers must allow transfers, but there is no obligation to accept transfers. That is why not all Isa providers do this.

We look at the best interest rates you can get and explain the rules around transferring money from an old Isa to a new one.

– Check out the best easy-to-access cash Isa rates on This is Money best-buy tables

What are the cheapest Isa rates?

The average easy-to-access cash Isa currently pays 1.26 percent, according to Moneyfacts.

If you are currently earning interest around this level or even less, you should definitely try moving your money elsewhere.

There are currently a number of providers who pay more than 2.25 percent: a whole percentage point more than the average deal. But you can do even better than this.

In terms of getting the best possible deal, those who bank with Virgin Money, Clydesdale Bank or Yorkshire Bank have access to an exclusive Virgin Money easy access cash Isa deal paying 3 per cent.

If you want this market-leading rate, you’ll need to open a free Virgin M Plus checking account.

The Isa cash account allows you to switch from your current provider. If you want to transfer your current year’s subscriptions, the full amount must be transferred.

In terms of the other top deals, there are three building societies: Nationwide, Principality and Scottish Building Society, all of which have deals that pay 2.5 per cent and allow transfers.

The Principality’s deal includes bonus interest of 0.4 percentage points paid for the first 12 months.

Nationwide’s one-year triple-entry account has a caveat, in that it allows up to three withdrawals during the 12-month term.

For those who make more than three withdrawals, their rate drops to 0.75 percent for the remainder of the term.

The Scottish Building Society’s 2.5 per cent deal has no such restrictions and can be opened with a minimum deposit of £100.

It’s worth pointing out that all of these providers are FSCS backed, meaning your money is protected up to £85,000 by the Deposit Guarantee Scheme.

What are the rules when saving in a cash ISA?

It is worth being aware that you can only have one active Isa per year.

So you can’t open multiple money ISAs in one tax year and take advantage of every tax-free savings.

It also means that if your existing cash Isa opened in the current tax year, you’ll have to transfer the entirety to the new provider and close the old account.

However, if you transfer Isa funds incurred during a previous tax year, you can transfer as much as you wish without affecting your current annual Isa fee.

As for the question of upgrading the fund, this does not have to be accepted by the new provider.

One important thing to avoid is withdrawing your funds from an Isa. If you do this, your money will lose its tax-exempt status – so make sure you follow the correct transfer process.

The best way to switch is to contact the new provider and fill in an Isa switch form.

Who is a cash ISA suitable for?

The fact that your easily accessible savings are in an Isa account means that the interest you receive is tax-free.

That said, it’s worth remembering that if you’re a base rate taxpayer, you could earn up to £1,000 in interest each year without paying tax. If you’re a higher rate taxpayer, you can still get up to £500 in tax-free interest per year.

However, if you’re an extra taxpayer earning £150,000 or more (to £125,000 or more from April next year) you won’t get any personal savings, so an Isa in cash will certainly make sense under those circumstances.

The best non-Isa easily accessible savings deal is with Al Rayan Bank and pays 2.81 percent. Someone with £10,000 in this account would earn £284 in interest over the course of a year.

If you’re a base rate or higher rate taxpayer, that means you don’t have to pay tax on that interest in any given year — unless, of course, you earned money elsewhere from interest that caused you to exceed the respective limits.

That said, there is little difference between the best non-ISA easy-access deals and the best cash ISA easy-access deals right now.

By withdrawing money from your cash Isa, you lose the tax-free packaging in the future, which could be a decision you’ll eventually regret when interest rates rise.