The countdown to the new tax year ticks away – time to use your cash ISA allowance or lose it

16th March 2018

With less than three weeks to go until the end of the 2017/18 tax year, cash ISAs are the focus for many savers now – either planning ahead for the new tax year or looking for a home for the current year’s allowance - before it’s too late.

Traditionally, this is the time of year that providers compete most for savers’ cash ISA funds by launching improved offers and market-leading rates. However, this tradition has declined over recent years, as less and less providers fight to get to the top of the best buy tables. The encouraging news is that cash ISA rates, on the whole, have been steadily increasing over the last six months.

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. By making the most of your allowance going forward, you can accrue similar amounts – or even more as the cash ISA allowance has increased significantly since their introduction. 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. 

Since the introduction of the Personal Savings Allowance (PSA) in 2016, the popularity of cash ISAs has waned, as more savers earn tax-free interest on standard accounts. However, the humble cash ISA should not simply be dismissed out of hand – our recent article – Why it’s important not to dismiss cash ISAs – talks you through this in more detail.

First and foremost, if you are looking for a home for your 2017/18 cash ISA allowance, you should start to look at your options now, as a number of providers will stop taking deposits into cash ISAs before the end of the tax year. So, you may not wish to delay, as you could find that your choice is restricted.

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


Easy access cash ISAs

If you are looking for easy access to your ISA money, the top rate on the market at the moment is from Nationwide, paying 1.30% tax free/AER on its Single Access Saver, with 1.40% available if you’ve been a member for at least a year. However, there is a catch, with only one withdrawal allowed per year or the rate drops considerably.

If this doesn't suit you, Al Rayan Bank offers its Instant Access Cash ISA, paying an expected profit rate of 1.22% tax free. It is worth noting that this is a sharia compliant account - for further information on how these accounts work, click here for our recent article.

The next highest rate is from Virgin Money at 1.21% tax free/AER, with a straightforward account that allows transfers in and the option to open online, in branch or by post.


Notice Cash ISAs

Top of the tables at the moment is a relatively new offering from Charter Savings Bank. Its 95 Day Notice Cash ISA - Issue 2 pays 1.31% tax free/AER and accepts transfers in from existing cash ISAs.

Next highest and with a shorter notice period on offer is the latest from Coventry Building Society. Its 30 Day Notice ISA (5) pays 1.25% tax free/AER and also accepts transfers in.


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


Fixed Rate Cash ISAs

You can often 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 those looking for a shorter term, OakNorth Bank pays 1.52% tax free/AER for one year, while both Paragon and Charter Savings Bank pay 1.67% tax free/AER for two years.

If you are happy to tie your cash ISA funds up for longer, Virgin Money currently leads the way for three years, paying 2.00% tax free/AER. Then for five years, Charter Savings Bank offers the top rate of 2.25% tax free/AER.

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


Cash ISA Transfers

Don’t forget, with the prospect of improved rates, now is also a good time to review your current cash ISAs using our Rate Tracker Service and consider transferring to a better option.

Always 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.

So, there are encouraging signs that we will see some improved cash ISA rates as we approach the end of the current tax year and move into the new one – watch this space and we will keep you up to date with all the latest news as we get it.

If you need help picking a suitable cash ISA or need any assistance with your savings, call us on 0800 011 9705, we’d love to hear from you.


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