Tonight’s episode of the Martin Lewis Money Show covered all the things you need to do before the new tax year starts next month – a so-called “spring clean of your finances”
Martin Lewis issued an urgent warning to people who have savings in a cash ISA. The Martin Lewis Money Show returned to ITV screens tonight for the last episode of this series.
Tonight’s show covered all the things you need to do before the new tax year starts next month – a so-called “spring clean of your finances”. Martin covered topics including energy and broadband bills, council tax, and water bills – to name just a few.
The Money Saving Expert (MSE) website founder also covered Cash ISAs and issued a warning to everyone who has one. Martin explained that each tax year, every UK adult gets a £20,000 allowance to put into a cash ISA, which allows you to put money away as savings or investments to protect it from tax.
He said: “Okay so with cash ISAs, you need to use them or lose them by April 5. An ISA is just a savings account where you are not taxed on the interest. It’s no more complicated. You can put in £20,000 per tax year in general and if you need to fill this year’s, you will need to do so now.
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“Even though the deadline for the year is April 5 in practice, many of the product providers close earlier for admin, so you need to get on with it and sort it out. Now, the important thing to understand is if your money’s in the cash ISA, it’s tax-free year after year.
Let me explain it this way. So you could put in £20,000 this year right now. Now that would be for this tax year’s cash ISA. Then, on April 6, you get another £20,000 for next year’s tax year. So now you’ve got £40,000 pound in, and if things don’t change the next year, you can put in another £20,000 and have £60,000 in your cash ISA.
“People have hundreds of thousands of pounds in their cash ISA, and this is why you need to beat the deadline. As you don’t want to lose out on next year’s allowance as you want to max it out when it is appropriate for you to do so.”
Martin then highlighted what the current rules around tax and savings are in the UK and why a cash ISA is “so important”. Under the current rules, the personal savings allowance for 20% basic rate taxpayers is £1,000. This means you can earn up to £1,000 worth of interest before having to pay tax. For taxpayers paying the higher 40% rate, the allowance is £500. Additional rate taxpayers – so those with a salary higher than £125,140 – receive no tax break at all.
Martin then noted that the best easy-access cash ISA account on the market at the moment was the Trading 212’s, which has an interest rate of 5.25%. However, he noted that the top ones had changed several times in the lead-up to the show this evening, adding: “They probably knew I was going to cover the best ones on tonight’s show, so wanted to be the best.”
Other top easy-access performers at the moment include:
- Top Streight Rate: Trembo – 4.8%
- Top Big Name: Post Office – 4.4%
Martin also warned viewers that they cannot “just withdraw the cash” because they would lose their cash ISA status and would use up this year’s allowance. Instead, they should transfer their cash to a better-paying ISA account.
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