MILLIONS of savers should ditch their cash Isa according to Martin Lewis, founder of the consumer site MoneySavingExpert.
The consumer champion and journalist issued an urgent warning on the matter in the latest MoneySavingExpert weekly newsletter.
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Martin said only those saving £65,000 or more should think about opening a cash Isa.
He said this because most don’t pay tax on savings interest so it’s not worth it.
And this has been the case since 2016 with the introduction of the personal savings allowance or PSA.
Each year you get a £1,000 savings allowance, which is the amount you can earn in interest before you pay any tax.
For higher-rate taxpayers, the allowance is £500 a year instead.
This is great for any savers who don’t use an Isa, but instead have money in a standard savings account.
Even though interest rates are rising in easy-access savers, you’d still need to have an awful lot of money stashed away to max out this allowance.
According to MoneySavingExpert’s research “At today’s top easy-access rate, a basic-rate taxpayer would only pay tax on savings if they have £65,000+.
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“That’s why these days, most people – over 19 in 20 – don’t actually pay tax on savings interest.”
MoneySavingExpert summarised the issue and said that “most” should ditch cash Isa’s because there’s no gain AND they often pay less interest.
How can I make my savings go further?
Sign up for a Lifetime Isa (LISA) to get thousands of pounds in free cash if you’re a saver.
You could bag up to £32,000 for free from the government.
A LISA is savings account for anyone aged 18-49. It’s opened to help people save for buying a first home or for their retirement.
You can put in a maximum of £4,000 a year until you’re 50, and the government adds an additional 25% bonus onto what you put in.
You’ll also get tax relief if you set up a self-invested personal pension. If you are a basic rate tax payer paying into these pensions, you’ll get 20p from the government through tax relief, for every 80p you put in.
But most importantly if you need easy access to your savings – check out the regular accounts paying the most in interest.
You could earn up to 5% interest on some accounts. Nationwide’s FlexiDirect account is paying customers 5% on balances up to £1,500 with £1,000 in regular payments.
If you’re looking for an easy-access savings account – which’ll allow you to take your money in and out anytime – look no further than the Chase account.
If you open a current account with Chase, you’ll get a free easy-access Chase savings account on the side which pays 1.5% in interest.
