Cash ISAs vs savings account – ‘Best place’ for cash as tax end looms

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In the run up to the end of the current tax year – which falls on April 5, 2023 – almost six in ten UK adults plan to make changes to their individual savings accounts (ISAs), according to new research. Whether someone should open a savings account or an ISA depends on their needs and savings goals.

Driven by a relatively high-interest rate environment, the most popular alteration is putting more money into an existing cash ISA, which 12 percent of people are planning to do, new research from Alliance Trust’s Profit highlighted.

The main advantage of an ISA over a savings account is that people can save up to £20,000 tax-free, but people typically find better interest rates on savings accounts.

However as the base rate continues to increase, cash ISAs have also been on the up.

Adam Thrower, head of savings at Shawbrook spoke exclusively with on how savers can make the most of their money in the run-up to tax year end.

He said: “With the 2022/23 ISA deadline fast approaching, it’s important to ensure you are maximising the benefits your Annual ISA Allowance has to offer.

“At Shawbrook we’ve seen a 49 percent increase in Cash ISA account openings compared to the last tax year (2021/22*), and with interest rates the highest they’ve been in over a decade, there’s never been a more opportune time to take stock of your savings and make sure they’re working harder for you.

“We want consumers to save smarter and not harder. Assess your savings goals, shop around for the best deal and make sure that you have the right mix of flexibility and return so that you can make the most of your total ISA contribution before the deadline on April 5.”

Although economic conditions have been turbulent, rising interest rates have actually aided ISAs as savings rates rise as well, helping to mitigate the challenges laid down by rising inflation.

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He explained that putting more money into ISAs now can help savers get more value from their money, as well as offer better protection against future financial hurdles.

However, most people don’t pay tax on savings anyway. Since 2016, the personal savings allowance (PSA) means basic rate (20 percent) taxpayers can earn £1,000/year interest in any savings tax-free – while the limit is £500/year for higher rate (40 percent) taxpayers.So currently savers would need over £29,000 (£14,500 at higher-rate tax) in top easy-access savings before they earned enough interest to be taxed, over £22,000 (£11,000) in the top two-year fix.

Though if interest rates rise further, those amounts will get smaller.
Normal savings usually pay slightly more than cash ISAs. Those who aren’t bigger savers could just go for the highest rates, which means top savings, not ISAs.

If someone has under £20,000 – they could always just put that in an ISA in future – there’s no harm going for higher rates now.

He added: “So cash ISAs are best for those with bigger savings, as once in an ISA, the interest doesn’t count towards the PSA (so people can earn £1,000 interest on top of whatever their ISAs pay).”’s savings expert, Lucinda O’Brien compared the best savings rates this week.

Ms O’Brien said: “The new tax year is nearly here and we’ve seen some ISA deals come through from providers.

“Santander is currently offering the top rates for a one-year fixed-term ISA at 4.15 percent and its 18 months offering is at a competitive 4.25 percent.

“Santander is also offering a £50 voucher if someone transfers a non-Santander ISA of £10,000 or more to one of its fixed-rate ISAs (Ts and Cs apply).

“Elsewhere, Paragon’s Triple Access ISA has the best interest rate for an easy access ISA at 3.10 percent and Furness Building Society’s 45-day notice ISA is just in front with 3.30 percent.”

Easy-access savings accounts
Account type – Product name – Interest rate
Instant access – Clearbank: Chip Instant Access – 3.40 percent

Notice savings accounts
Account type – Product name – Interest rate
7-day notice savings account – Zopa Smart Saver (Boosted Pot – 7 Day Notice) – 3.25 percent
31-day notice savings account – Zopa Smart Saver (Boosted Pot – 31 Day Notice) – 3.31 percent
90-day notice savings account – Investec 90-Day Notice Saver – 3.55 percent

Commenting on the research, Mark Atkinson at Alliance Trust said:
“Those who do not already have ISAs should take them into consideration for their financial planning over the next year.

“As well as being tax efficient, cash ISAs offer convenient easy access, making them a useful tool for dealing with any unexpected expenses.

“Those looking to prioritise growth, and who are looking to hit longer-term financial targets, should consider stocks and shares ISAs.”

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