It's cash Isa time again: but do the sums before you choose

The start of the new tax year has brought banks and building societies scrambling to attract cash destined for this year's Individual Savings Accounts (Isas). The good news is that fierce competition for your money means there are some excellent rates on offer for mini cash Isas. However, you need to exercise caution as some have penalties attached.

Firstly, some providers will levy a fee if you want to transfer your Isa. In Cash last week we wrote about the Portman building society's two new Isas: a regular saver account paying 8 per cent interest, and a 15-day notice product paying 5.3 per cent.

At the end of 12 months, money is automatically transferred to Portman's Easy Access Isa, paying 4.5 per cent. If you want to transfer out of this account, you face a £30 fee, which could wipe out all your interest earned.

Saffron Walden building society's mini cash tracker Isa is one of the best buys according to Moneyfacts, the independent money information service. It has a 30-day notice period and is also paying a rate of 5.3 per cent, which includes a bonus for the first six months. After the six-month bonus period you must either give 30 days' notice of withdrawal or lose interest and face a £30 fee.

'Organisations paying higher rates can't afford to lose your money after six months, which is why many have penalties for early withdrawal,' says Terry Cutworth at Moneyfacts.

Another catch is that many bonus rates only last for six months, which means that some accounts with a lower headline rate actually offer a better deal over the course of a year.

The new Direct Isa from National Savings & Investments (NS&I), for example, has no notice period and pays 5.05 per cent on sums of £1,000 and above. Its rate is slightly lower than that of another Moneyfacts best buy, Tipton & Coseley building society's Premier Isa, which is paying 5.15 per cent on sums of £3,000 and above - but this includes a bonus rate for six months of 0.35 per cent.

Cutworth says: 'Over a 12-month period, the Tipton & Coseley Premier Isa has an AER [the real rate over a year] of 4.97 per cent, and has a 30-day notice period if you want to transfer your money out. So if you are looking for an account that means you don't have to keep moving your money around, the National Savings Isa offers a good deal.'

Susan Hannums of independent financial adviser Chase de Vere also likes the deal from NS&I. 'The rate is guaranteed to be 0.55 per cent above base rate until 5 April 2008, which gives you great peace of mind if you don't want to keep swapping around between providers.'

Hannums also likes the Guaranteed Isa launched last week by National Counties building society, which is paying 5.1 per cent on a minimum deposit of £1 and guarantees to pay 0.4 per cent above the Bank of England base rate until 5 April 2007.