I have just moved to the UK and want to open an Isa – where do I start?

I am new to the UK and I want to look into opening a cash Isa.

I am 59 and have some savings which I’d like to put into this sort of savings deal. I wouldn’t need to draw on this Isa, but would like to know two to three withdrawals a year could be made for emergencies if needed.

I would also like to start an Isa for my daughter and son, both in their 30s. My son is not resident in the UK. Is this possible? Via email

Helen Kirrane of This is Money replies: Isas offer UK residents the opportunity to save up to £20,000 tax free each tax year. Some of the best cash Isas are offering more than 4.8 per cent interest at the moment.

This is more important than ever, as interest rates have risen sharply over the last two years. 

This means that more basic rate tax payers have had to start paying tax on their savings interest with smaller pots. 

For further expert advice, we spoke to Anna Bowes, co founder of Savings Champion and James Blower, founder of Savings Guru.

Anna Bowes replies: Welcome to the UK. Individual Savings Accounts (Isas) are a great way to save and invest money tax-efficiently, but there are other allowances to be aware of too, that may be available to you and your children, depending on your/their income.

Firstly, you could benefit from the Personal Savings Allowance (PSA) depending on how much tax you pay. Basic rate taxpayers can earn £1,000 a year in savings interest, and pay no tax.

Higher rate taxpayers have a £500 PSA – but additional rate taxpayers do not have a PSA at all.

There is also the starting rate for Savings, which is an allowance of up to £5,000 of cash savings interest that you may not have to pay tax on, if your ‘other’ income (such as wages or pensions), is less than £17,570 a year.

If you are likely to fully utilise your PSA and are ineligible for the starting rate for Savings, then a cash Isa could be a really useful extra allowance to use – which is currently £20,000 a year.

There are both easy-access and fixed-term cash Isas, as well as notice accounts – but one thing to note is that unlike fixed term bonds, you can get access to fixed-term Isas in an emergency, although there is likely to be a hefty penalty. 

So perhaps you could open an easy-access Isa with the money you might need access to, and put some other money into a fixed rate Isa that you would only access in an emergency.

Recent rule changes means that this is possible, but you need to check with each provider as they may not have adopted the new rules.

James Blower replies: You are right to consider Isas as they are a great option to earn interest without paying tax. 

Although the PSA enables UK taxpayers to earn £500 (higher rate taxpayers) or £1,000 (basic rate) of interest without paying tax, with interest rates still high, savers need less than £10,000 (higher rate tax payers) or £20,000 (basic rate) to have to pay tax.

Another advantage of Isas is that the rates on easy-access Isas are currently higher than taxable accounts.

You mention that you would like access for emergencies. This is something that all Isas allow but, in the case of fixed-rate Isas, providers can charge a fee for this.

Typically it will cost 90 days interest to access a one-year Isa and a whole year’s interest to access a five-year Isa.

Given this, if you think you might need access, easy-access Isas are likely to be a better option. You should also consider a flexible Isa, which allows you to replace the money taken out without losing your allowance.

Helen Kirrane replies: Many of the best easy-access Isas at the moment are offered by app-based providers, so you will need to download an app to open them.

Plum has an easy-access cash Isa paying 5.17 per cent interest. But this rate includes a bonus rate of 0.88 for the first 12 months. After this the rate drops to a variable 4.29 per cent, which could go up or down. The minimum amount needed to open this Isa is £100.

You need to be aware with this account that if your Isa balance drops below £100, or you make more than three withdrawals in a year, the rate drops to 3 per cent.

The only drawback with Plum’s account is that it is not flexible. 

It is worth considering a flexible cash Isa because they are a great savings tax-beating tool. 

They allow you to dip into your pot, and, as long as you put the money back in during the same tax year, it doesn’t lose its tax-free wrapper or use up any of that year’s £20,000 Isa allowance.

Chip has an easy-access cash Isa which pays 5.1 per cent interest. This Isa does not allow transfers in from another Isa, but as you do not have an existing Isa this should not pose a problem. It has the added benefit of being a flexible Isa. The minimum amount needed to open this Isa is £1.

If you don’t want to download an app to open an Isa, Paragon Bank has an easy-access Isa paying a rate of 4.95 per cent. The minimum amount needed to open this account is £1,000 and it can be opened online on Paragon Bank’s website. 

Though it is called ‘easy-access’, you can actually only make two withdrawals every 12 months. You will be penalised by the rate dropping to a mere 1.5 per cent if you withdraw your money a third time in 12 months. 

Like Chip’s Isa, Paragon Bank’s Isa has the added benefit of being a flexible Isa.

> See our round up: Five of the best cash Isas

Opening an Isa for your children 

James Blower replies: In terms of supporting your son and daughter, there are a couple of challenges here. They are too old for junior Isas so you could not open an account for them. 

In the case of your daughter you could gift her the money to open one, but the Isa itself will have to be in her name – you will have no control over what she does with that money.

With regards to your son, this won’t be possible as he will need to be UK resident to open one. While it is possible to retain an Isa if a saver opens one while living in the UK and then moves abroad, it is not possible to open one if not resident – unless working for the Crown overseas e.g. in the Armed Forces or as a diplomat

Anna Bowes replies: For your children, your daughter may want to consider a Lifetime Isa if she is looking to buy her first home with the money. I’ll elaborate in a moment.

Your son though, if he is not a UK resident, a member of the UK armed forces or a crown servant, will not be able to open an Isa.

With regard to the Lifetime Isa – the benefit of this account is that for every deposit made – up to the maximum allowance of £4,000 per year – the government will add a 25 per cent bonus. So if your daughter were to deposit £4,000, the account will be uplifted by a £1,000 bonus.

However, as you might expect, there are rules that need to be followed. You must be aged between 18 and 39 to open a Lifetime Isa.

If you want access to the money before the age of 60 it must be used for the purchase of your first home – which cannot be more than £450,000. 

She’d also need to hold the Lifetime Isa for at least 12 months before using it for a house purchase.

If not for a house purchase then she will either pay a penalty of 25 per cent on each ‘unauthorised withdrawal’ until the age of 60 – at which point there is no penalty to withdraw the cash for any purpose.

Whilst the 25 per cent penalty sounds like you would simply be paying back the bonus you were given by the government, its not quite as simple as that.

What it actually means is that not only is all of the government bonus clawed back, but 6.25 per cent of your personal contribution as well.

For example, if you were to deposit the maximum £4,000 into the Lifetime Isa, the Government will top it up by £1,000. 

If you needed to withdraw the full £5,000 you would have to pay a penalty of 25 per cent on £5,000, which is £1,250. So, assuming that no interest has been earned, you would receive back just £3,750 of your original £4,000 deposit.

All of this said, an Isa is a valuable tool to earn tax-free returns from your saving or investments – just make sure you pick the best choice.