Cash ISA countdown - encouraging early signs as we head towards the new tax year?

02nd March 2017

With just over a month to go until the 2017/18 tax year, many savers will be starting to look at where to put their cash ISA funds, either using up their current tax year allowance or planning ahead for the new tax year.

Traditionally, this is the time of year that providers compete for savers’ ISA funds by launching improved offers and market leading interest rates. However, we have seen this tradition decline over recent years, as less and less providers fight to get to the top of the best buy tables. The encouraging news is that whilst last year there was very little activity amongst providers, we have seen some positive movements already this year.

The cash ISA remains a valuable part of an effective savings strategy, offering tax-free interest on the full balance held in an ISA. Over the years, since the inception of the ISA in 1999, sizeable balances will have been accrued, if the ISA allowance has been utilised each tax year and by making the most of your allowance, you can accrue similar amounts. The key point to note is that if you don’t use your ISA allowance, you will lose it forever, reducing the amount you can save tax-free in the future. 

Over the last few weeks we have started to see some stirrings amongst providers, with a number of new best buy accounts launched. We have seen a new market-leading 5 year fixed rate cash ISA launched by Virgin Money, a market-leading 2 year fixed rate cash ISA from Darlington Building Society, new best buys from Principality Building Society and even a rare appearance from Nationwide in our Fixed Rate Cash ISA best table.  

If you are looking for a home for your 2016/17 cash ISA allowance, you should start to look at your options now, as in previous years, a number of providers stopped taking deposits into cash ISAs before the end of the tax year. So, you may not wish to delay, as you may get less choice, the later you leave it.

Don’t forget, with the prospect of improved rates, now is a good time to review your current cash ISAs and consider transferring to a better option, if the interest rates you are receiving are not competitive. Ensure you approach the new provider with your transfer request and they will take care of moving the funds for you. However, please bear in mind that not all accounts allow transfers in, so make sure you read the information carefully or contact us for assistance.

Whether you are looking for a home for this year’s allowance or are starting to get organised for next tax year, here are some of the best options currently available.

If you are looking for easy access to your ISA money, the top rate on the market at the moment is from Paragon Bank, paying 1.05% tax free/AER. The next best rate is from Virgin Money at 1.01% tax free/AER, although with this option, you are restricted to just three withdrawals per year or the interest rate drops significantly.

For more information on the above accounts or for further options, take a look at our Variable Rate Cash ISA Best Buy Table.

You can sometimes get a higher return on your cash ISA by tying up your funds for a fixed period of time. Interest rates are fixed for up to five years, though you cannot normally access your funds within the period, unless you pay a penalty.

For a shorter term, both Virgin Money and Bank of Cyprus UK pay 1.05% tax free/AER for 1 year. For 2 years, Darlington Building Society pays 1.25% tax free/AER and for 3 years, Leeds Building Society, Principality Building Society, Skipton Building Society and Paragon Bank all pay 1.30% tax free/AER. As mentioned earlier, Virgin Money pays 1.65% tax free/AER, which is currently the best rate for 5 years, the longest term available.

For more information and options, click here for our full Fixed Rate Cash ISA Best Buy Tables

So, there are encouraging early signs that we will see some improved rates on ISAs as we approach the end of the current tax year and move into the new one. The great news for savers is that the ISA allowance will rise to £20,000, a significant increase and one that shows that sizeable sums can be accrued into a cash ISA, offering tax-free savings both now and in the future.

If you need help picking a suitable cash ISA or need any assistance with your savings, call us on 0800 321 3581, we’d love to hear from you.

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