The end of the tax year is nigh, so you don’t have much time left to use up your Cash ISA allowance. 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 higher 40% rate taxpayers, the allowance is £500. Additional rate taxpayers – so those with a salary higher than £125,140 – receive no tax break at all. However, you can avoid paying tax on your savings if you put the money into a Cash ISA.
This is a savings account which protects your money and investments from tax. Each tax year, every UK adult gets a £20,000 allowance to put into a Cash ISA. This then renews when the new tax year starts.
This means savers can still put away up to £20,000 before April 6, and then when April 6 arrives, they can deposit another £20,000 for the following year until April 5, 2026.
If nothing changes over the course of the next tax year, then next April you could put in another £20,000, giving you a total of £60,000 in there. This money is then protected going forward, so you could have hundreds of thousands in a cash ISA, and not pay any tax on it whatsoever.
Like savings accounts, there are different types of Cash ISA’s you can open. With fixed-rate Cash ISAs, your interest rate remains the same for the duration of it or for a set period such as one year or three years. Sometimes, there might also be limits on how often you take money out of the account.
Easy-access Cash ISAs allow you to take the money out when you like. However, the interest rate tends to be variable, so it could rise and fall. However, you should be aware that as we approach the end of the tax year. ISA providers close earlier for admin, so you need to get on with it and sort it out as soon as you can.
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