NatWest has become the latest big bank to launch two table topping cash Isa deals.
Its one-year fixed rate cash Isa is offering a tax-free interest rate of 5.7 per cent, while its two-year fix is paying 5.9 per cent.
Last month, Lloyds Bank made headlines when it also launched two market leading cash Isa deals – back then it was 4.95 per cent 5 per cent respectively for a one-year and two year fix.
Someone putting £10,000 in NatWest’s one-year deal will earn £570 of tax-free interest over 12 months. Those opting for its two-year cash Isa will earn £1,180 over the two year period.
Top dog: NatWest one-year and two-year fixed rate cash Isa deals are both market leading.
What makes NatWest’s offer even more enticing is that its effectively closing the gap on the best taxable fixed rate savings accounts.
The best one-year and two-year fix, currently offered by Vanquis Bank, pay 6.15 per cent and 6.2 per cent respectively.
That equates to a 0.3 percentage point gap between the best two-year cash Isa and two-year taxable account. At the start of this month, the gap was 0.74 percentage points.
– Check out the best fixed rate savings deals here.
At present, all those who save outside of an Isa could face a tax bill on their savings.
Basic-rate taxpayers can earn up to £1,000 interest tax-free each year.
Higher rate taxpayers can earn up to £500, while additional rate taxpayers (those that earn over £125,140) get no protection from the taxman at all.
A basic rate taxpayer with money in the Vanquis one-year fix needs £16,262 in savings to tip them over the amount of interest they can earn before tax is due.
A higher-rate taxpayer would need £8,131 in the account for tax to be owed.
However, once that personal savings allowance has been used up, the real return (after tax) on the 6.15 per cent deal falls to 4.92 per cent for basic rate taxpayers and to 3.69 per cent for higher rate taxpayers.
Savers can put up to £20,000 in an Isa each year.
If they haven’t yet done so, and are considering a savings product, the NatWest Isa deals could make much more sense than the higher paying taxable fixed rate accounts.
Moreover, unlike the taxable fixed rate deals that won’t allow withdrawals, cash Isa fixed rates offer a little more flexibility.
NatWest, for example, allows savers to close their account early and withdraw their funds subject to the loss of 90 days of interest.
For anyone considering moving their existing Isa to NatWest, they can also do so.
It accepts transfers in from cash Isas, stocks and shares Isas, Lifetime Isas and Help to Buy Isas.
On its website, it warns the deal might not last long. It says: ‘Available until 5pm on 9 August 2023 to new customers and 14 August 2023 to existing customers.
‘Please note that these issues may be withdrawn early due to limited availability.’
