Cash ISA rate offers ‘among the worst on record’

Top rate five years ago was 3.15%
Top rate five years ago was 3.15%

The cash ISA rates being offered to savers as the new tax year approaches are among the worst on record, according to a website.

Moneyfacts.co.uk said the looming personal savings allowance, which from April 6 will mean many people no longer have to pay any tax on their savings held outside Isas, may be partly to blame for making Isa rates worse.

In the past, ISA providers have made their offerings more attractive around this time of year, to woo savers who have yet to use their Isa allowance of £15,240 before the current tax year ends, or who are looking for a place to stash their cash when the new tax year starts from April 6.

ISAs currently have tax advantages over other accounts, but people’s reliance on them as a shelter from the taxman is expected to be weakened from April 6, when the new personal savings allowance is introduced.

The change means basic rate taxpayers paying 20% tax will be able to earn up to £1,000 in savings interest tax-free and higher rate taxpayers paying 40% tax will be able to earn up to £500 in tax-free savings income.

The new allowance will include account interest from bank and building society accounts as well as accounts with credit unions and NS&I (National Savings and Investments) and other types of income, such as that from government or company bonds.

Interest earned from tax-free Isas will not count towards the personal savings allowance, as money held there is already ring-fenced from tax.

Moneyfacts said that five years ago, the top easy access ISA rate was 3.15%.

Six months ago, it was 1.51%, and now it is a deal at 1.41% being offered by Virgin Money’s E-ISA.

Also among the top current deals, Coventry Building Society and Post Office Money are both offering easy access deals at 1.4%.