SAVERS trying to put some money away for a rainy day have had it tough for more than 10 years now.
So where should you put your savings – even if the rates aren’t anything to get too excited about?
Cash Isas let you save tax free but are other savings accounts now a better option?[/caption]
Here The Sun explains what an Isa is and why there are probably better places to leave your savings.
What is a Cash Isa?
Each tax year, everyone over the age of 16 in the UK gets an Isa (Individual Savings Account) allowance, which lets them save cash tax-free.
This means they can earn interest on their savings in a bank, building society or other financial provider, without any tax deducted.
Savings kept in an Isa will continue to earn interest tax-free until the money is withdrawn from the account.
The maximum amount you can put away for the 2018/19 tax year is £20,000.
Are Cash Isas the only way you can save tax-free?
For many years, Isas were the number one option for savers, as you can shelter your hard-earned cash away from the hands of the tax-man.
But all that changed in April 2016 when the Government introduced a big shake-up to something called the Personal Savings Allowance (PSA).
Under the scheme, basic rate taxpayers can now earn £1,000 in interest a year tax-free – in whatever account they’re saving in.
While if you’re a higher-rate taxpayer you earn up to £500 tax-free.
At the time, the Government estimated the change meant the vast majority – around 95 per cent of adults – now no longer pay any tax on their savings.
Money expert, Andrew Hagger, said: “You can earn £1,000 per year in interest without paying tax, so a standard savings account makes better financial sense than an Isa.”
Current account savings
AS you can now earn interest tax free on any accounts and not just Isas, some savvy savers have been using current accounts to get a cash boost.
Here are some of the highest paying current accounts around.
Nationwide FlexDirect – You’ll get five per cent on balances up to £2,500 for the first year you have the account before it drops to one per cent.
Tesco Bank Current Account – This pays three per cent on balances up to £3,000, until April 1, 2019 (at the earliest). To get the interest you must pay in £750 a month and pay at least three direct debits from it each month.
But you are also allowed to open two accounts, so you could get three per cent on up to £6,000.
TSB Classic Plus – You’ll also get five per cent with TSB but only on balances up to £1,500.
What are the best easy-access Cash Isas?
With Cash Isas now without their main selling point, most savers will want to look at whatever account is paying the best rate to earn the most interest – and you wont find those in the old tax-free accounts.
But if you’re still looking for an Isa, then The Sun has had a look at what accounts are topping the best buy tables at the moment.
These easy access accounts mean you can take your money out without having to pay a penalty.
- Santander eIsa – Apply Here
Rate: 1.50 per cent
Minimum investment: £500
Interest earned on £1,000: £15
Please note: You’ll only get the best rate if you’re a Santander 123 World or Select Customer
- Leeds Building Society Online Access Isa – Apply Here
Rate: 1.46 per cent
Minimum investment: £1,000
Interest earned on £1,000: £14.60
Please note: You can hold this account until May 4 in 2020, which is when it matures
How do you switch Isa provider?
IF you're in the market for a new, better paying Isa, there's one thing you shouldn't do.
Never withdraw money from your Isa account to put it into your new one – if you do it’ll lose its tax free benefits.
Instead you need to follow the simple transfer process.
Make sure that the new account you want to use accepts transfers (not all do) and then fill in the Isa transfer form with the new provider.
It will arrange for your savings to be transferred over, with the process taking no more than 15 working days.
And remember, you can only have one “active” Cash Isa per tax year.
More on money
What are the best fixed-rate Cash Isas?
If you can afford to tie your money up for a while, you’ll find better rates of interest with fixed-term accounts.
Remember, with these type of accounts you will still be able to access your money if you need it but you’ll likely have to fork out an expensive penalty to do so.
Make sure you know what you’ll pay if you need to access your money before you sign up.
Best for one year
- Shawbrook Bank One Year Fixed Rate Cash Isa – Apply Here
Minimum investment: £1,000
Rate: 1.77 per cent
Interest earned on £1,000: £17.70
Best for two years
- Charter Savings Bank Two Year Fixed Rate Cash Isa – Apply Here
Minimum investment: £5,000
Rate: 1.95 per cent
Interest earned on £1,000: £39
Best for three years
- Coventry Building Society Fixed Rate Cash Isa (matures November 31, 2022) – Apply Here
Minimum investment: £1
Rate: 2.05 per cent
Interest earned on £1,000: £77.33
Best for five years
- Shawbrook Bank Five Year Fixed Rate Cash Isa – Apply Here
Minimum investment: £1,000
Rate: 2.30 per cent
Interest earned on £1,000: £120
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