Last-minute tips for Cash Isa savers

20 March 2018

Cash Isa rates continue to edge up slowly as we approach the end of the tax year on 5 April. 

Savers can put up to £20,000 into a Cash Isa savings account this tax year and pay no tax on the interest they earn. Next tax year - which starts on 6 April - you will have another £20,000 Isa allowance, giving you the chance of putting £40,000 outside the reach of the taxman. 

Here are some last-minute tips to make the most of your Isa allowance ahead of the tax year end. 

Loyalty comes at a cost 

Those who have already have savings in Cash Isas should look to switch to a better deal. The cost of remaining loyal to the big banks is fast increasing. The city regulator, the Financial Conduct Authority, says only one in 10 savers have switched their Cash Isa in the last three years.  Four out of ten have not switched for more than five years. 

The top rate, available on easy access accounts for both new money and existing Cash Isas, is 1.25% from Shawbrook Bank. Big banks still pay as little as 0.1% to some Isa savers.

Nationwide’s new Loyalty Single Access Isa pays a top 1.4%.  But it’s not exactly an easy-access account as you can only make one withdrawal a year. If you make more, your rate drops to 0.5% for the rest of the year. It’s only available to those who have been a member of the building society for at least a year.  The society has another version, Single Access Isa, at 1.3% for savers who miss out on its loyalty deal.   

Consider a fixed rate deal 

Fixed rate deals are also on the rise, with the top rate of 1.52% for one year from OakNorth Bank. Experts say the end of the Bank of England schemes in February, which gave banks and building societies a cheap source of money, has helped push rates up. Charlotte Nelson, finance expert from data analyst Moneyfacts, says: ‘Providers have started to look at how they will replace this vital form of funding. The knock-on effect is more competition for Cash Isa money.’

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Challenger banks beat the big names 

Your money is as safe with smaller, less well-known providers as with the big names.  In most cases it is covered up to £85,000 by the Financial Services Compensation Scheme if the provider goes under.

However, two top payers differ.  With French-owned RCI Bank you are covered up to €100,000 (around £88,000) under the French scheme.  With Swedish Ikano Bank, you have £85,000 worth of cover under Sweden’s version.

Mix and match 

You don’t have to keep all your old Cash Isas taken out in previous tax years with one bank or building society. Rather, you can spread them around as many as you wish. This gives you the chance to, say, put some in an easy-access Isa, some in Nationwide’s new deal and some into fixed rate deals with other providers, and carry on earning tax-free interest. However, any money you put into a Cash Isa during the current tax year must all be with one provider. 

How to move your Cash isa 

To move your Cash Isa, ask your new provider to arrange it for you. Cash Isa switches have got faster: banks aim to carry out four out of five switches within seven working days.  Latest industry figures show they beat their target last year, with 89% – nearly nine out of ten – going through within this time limit.

This article was written for our sister magazine Money Observer.

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