Do you want the best money Isa? Ignore the banks and look here, says SIMON LAMBERT

Where is the best place for a cash Isa? If you had asked that question five years ago, the answer would have been to look away from the big players, towards smaller players in the banking and construction sectors and some of the new digital challenger banks.

But there has been some commotion in the past year and if someone were to ask me now, I would say look at the new breed of cash offered by investment platforms and apps.

The top spots in This is Money’s best cash Isa tables have increasingly included names like Plum, Moneybox, Trading 212 and Chip in recent times.

Our fixed rate tables are still dominated by the traditional banks and building societies, but when it comes to easy-to-access cash Isas, these investment apps have staked their claim with blockbuster rates.

If you like opening and managing a cash Isa on your phone, which most of our readers will be, then these deals are definitely worth considering.

They are all genuine cash Isas – not investment shares and shares Isas that pay interest on cash balances – and offer FSCS protection of up to £85,000 per individual.

Yet another name more associated with the stock market world came in with a top deal last week, as CMC Invest* launched a cash Isa paying 4.85 per cent.

This closes at the back Trading 212s* 4.9 per cent cash Isa and forward Chips* 4.58 percent deal.

They are all defeated by the two table toppers, Plum* at 5.18 percent and Money box at 5.17 percent.

However, I would opt for one of the lower rates over Plum or Moneybox as they come with strict restrictions on withdrawals.

Plum’s rate drops to 2.5 percent after four withdrawals, while Moneybox’s drops all the way to 0.75 percent.

Some savers may be fine with that and won’t withdraw enough money to be affected.

But for me, the real value of an Easy Access Money Isa lies in combining its tax-reducing potential with the fact that it’s a home base for your everyday savings.

This is the pot you might have to dip into to pay big bills, make big purchases, finance vacations, or do any of those other expensive things that come along – and for me that’s always more than four times over the course of a year.

Why you need a flexible Isa

Many of us make the mistake of only using Isas for longer-term pots and keeping significant amounts of easily accessible cash in standard accounts.

This inevitably means that money is also lost on savings taxes.

Put your money into easy-to-access Isa money and you’ll be safe from tax – and this benefit can be increased even further by choosing a flexible Isa.

Flexible Isas allow you to withdraw cash and as long as you pay it back in the same tax year, you won’t lose any of your £20,000 annual allowance.

I’ve written about this before and you can read in more detail here why I think a flexible cash Isa is an essential building block for managing your money.

Flexible Isas have been around for some time, but not all banks and building societies offer them.

However, the feature has become a thing for this new cohort and Trading 212, Chip and now CMC Invest all offer flexible Isas that accept transfers.

So, what’s the reason behind this wave of great Isa money transactions?

If you’re feeling generous, it’s because these cash Isas have been designed from scratch by new providers who are trying to create products with the best aspects available.

But of course there is also a more calculated reason. Because there is a huge demand for good savings products and offering top-quality cash, Isa is a fast way to acquire new customers and a lot of money.

Platforms can then market their investment offering to those customers, after clearing the important hurdle of getting them through the door.

If interest rates fall, savers may switch, but a significant number will still remain as long as returns remain reasonable and service is good.

I obviously recommend that you shop for the best rate as often as possible, so if you open one of these accounts, keep an eye on the rates and take action if necessary. Remember to always check FSCS protection before signing up for anything.

But it’s certainly worth considering these new cash Isa players in the first place, especially as you’ve been allowed to pay new money into multiple Isas of the same type every year since last April.

> Check out our five of the best cash Isas overviews