Money-saving guru Martin Lewis has urged Brits to act quickly ahead of a looming deadline. It comes as the tax year ends on April 5, meaning savers have just days to make the most of their ISA allowance
Martin Lewis has issued an urgent reminder for savvy Brits ahead of a fast-approaching deadline. It comes as the tax year is coming to an end, meaning savers have just days to make the most of their Individual Savings Account (ISA) allowance.
In 2022/23, around 12.4 million adults subscribed to an ISA to protect their interest on savings being taxed. The accounts allow Brits to stash away £20,000 (either in one ISA or split across several types) every tax year – but aren’t hugely beneficial for everyone.
However, they’re a good choice for those who are at risk of exceeding their Personal Savings Allowance – which is set at £1,000 for those on the Basic rate Income Tax band, £500 on the Higher rate band, and £0 for Additional rate taxpayers. There is also a starting rate for savings, which is worth up to £5,000. “Every £1 of other income above your Personal Allowance reduces your starting rate for savings by £1,” states GOV UK.
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Should I open an ISA?
If you’re not in danger of exceeding your Personal Savings Allowance, you may wish to save your money in a normal savings account. However, ISAs can be beneficial for those slated to go over the threshold and often offer competitive interest rates. As previously reported, to exceed this level of interest and be hit by tax on your interest (not your actual savings) you would need to have more than £20,000 in a savings account of five per cent or higher for a full financial year, if you’re a 20 per cent tax-payer.
If you’re in the 40 per cent tax bracket, saving £10,000 in a five per cent savings account will push you over the threshold. You’ll then be paying 40p for every £1 in interest earned. For those on a sky-high salary that exceeds £125,141, you do not get a Personal Savings Allowance, and all of your interest will be subject to a 45 per cent tax.
ISA Deadline
In his eponymously-named BBC Sounds podcast with Adrian Chiles, the money expert warned Brits to beat the ‘urgent ISA deadline’ ahead of the end of the tax year. However, Martin states that many ISAs will have a cut-off date before April 5, meaning if you haven’t used your yearly allowance (£20,000) now is the time to do it.
Even if you’re not close to maxing out your ISA in this financial year, putting money in before April 5 means you can make the most of next year’s allowance if your circumstances were to change. Martin highlights how many easy-access Cash ISAs are currently offering better interest rates than standard savings accounts, adding: “You may as well just put your money in a Cash ISA because the interest rates are higher [even if you don’t need tax protection].
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According to Martin’s MSE Website, the high-paying Cash ISA at the moment is Trading 212. The firm is offering a 4.5 per cent interest rate with a 0.75 per cent three-month bonus for new customers. You only need £1 to open the account and will not get penalised for withdrawals.
“There have been rumours the Govt may do this – the latest suggest it won’t be in the Spring Statement but may be in Autumn’s Budget,” the site added. “Until then, carry on regardless – the more you can put in cash ISAs now, the more you have protected.”
*This article does not constitute financial advice. Always read the full terms and conditions before opening a savings account of any type.
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