SAVERS trying to put some money away for the future may want to consider opening an Isa.
Rates have tumbled after the Bank of England's recent base rate cuts, but there are still decent deals to be had.
What is a Cash Isa?
Each tax year, everyone over the age of 16 in the UK gets an Isa (Individual Savings Account) allowance, which lets them save cash tax-free.
This means they can earn interest on their savings in a bank, building society or other financial provider, without any tax deducted.
Savings kept in an Isa will continue to earn interest tax-free until the money is withdrawn from the account.
The maximum amount you can put away for the 2020/21 tax year is £20,000.
Are Cash Isas the only way you can save tax-free?
For many years, Isas were the number one option for savers, as you can shelter your hard-earned cash away from the hands of the tax-man.
But all that changed in April 2016 when the government introduced a big shake-up to something called the Personal Savings Allowance (PSA).
Under the scheme, basic rate taxpayers can now earn £1,000 in interest a year tax-free – in whatever account they're saving in.
While if you're a higher-rate taxpayer you earn up to £500 tax-free.
At the time, the government estimated the change meant the vast majority – around 95 per cent of adults – now no longer pay any tax on their savings.
Current account savings
AS you can now earn interest tax free on any accounts and not just Isas, some savvy savers have been using current accounts to get a cash boost.
Here are two of the highest paying current accounts around.
Nationwide FlexDirect – You'll get 2 per cent on balances up to £2,500 for the first year you have the account before it drops to 0.25 per cent.
TSB Classic Plus – You'll get 1.50 per cent with TSB but only on balances up to £1,500.
Check out our round-up of the best current accounts depending on how much you earn.
What are the best easy-access Cash Isas?
With Cash Isas without their main selling point, most savers will want to look at whatever account is paying the best rate to earn the most interest – and you wont find those in the old tax-free accounts.
But if you're still looking for an Isa, then The Sun has had a look at what accounts are topping the best buy tables at the moment.
These easy access accounts mean you can take your money out without having to pay a penalty.
- Cynergy Bank Online Isa – Apply Here
Rate: 0.90 per cent
Minimum Investment: £1
Interest earned on £1,000: £9
- NS&I Direct Isa – Apply Here
Rate: 0.90 per cent
Minimum investment: £1
Interest earned on £1,000: £9
- Allied Irish Bank Cash Isa – Apply Here
Rate: 0.75 per cent
Minimum investment: £50
Interest earned on £1,000: £7.50
What are the best fixed-rate Cash Isas?
If you can afford to tie your money up for a longer period of time, you'll find better rates of interest with fixed-term accounts.
Remember, with these type of accounts you will still be able to access your money if you need it but you'll likely have to fork out an expensive penalty to do so.
Make sure you know what you'll pay if you need to access your money before you sign up.
Best for one year
- Metro Bank Cash Isa – Apply Here
Minimum investment: £1
Rate: 0.70 per cent
Interest earned on £1,000: £7
Best for two years
- Security Trust Bank Cash Isa – Apply Here
Minimum investment: £1,000
Rate: 0.90 per cent
Interest earned on £1,000: £18.16
Best for three years
- UBL UK Fixed Rate Cash Isa – Apply Here
Minimum investment: £2,000
Rate: 1.10 per cent
Interest earned on £2,000: £67.07
Best for five years
- UBL UK Rate Cash Isa – Apply Here
Minimum investment: £2,000
Rate: 1.21 per cent
Interest earned on £2,000: £124.67
Source: Read Full Article