SAVERS are being urged to consider putting their money away into a cash ISA before the government makes potential changes.
A cash ISA is a type of savings account that offers tax-free interest on up to £20,000 your money.
They have become particularly popular in recent years as they have been able to offer similar rates to other accounts while remaining tax-efficient.
However, reports have emerged that Chancellor Rachel Reeves is being lobbied to ditch the tax breaks in an effort to encourage people to invest more in stocks and shares.
She is due to deliver a Spring Statement on 26 March, which some experts speculate could see ISAs tweaked.
It’s also expected the good rates on cash ISAs won’t last long and are likely to go down if the Bank of England reduces interest rates in the summer, so savers are being encouraged to move fast.
Although, Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, said there is “no clear indication” on Reeves’s stance yet.
However she said savers should “consider the ISA as their tax-efficient friend as they look to grow their savings and investments over the long term”.
She also noted that as you have a personal savings allowance of up to £20,000 to deposit into ISAs tax-free per year, it could be worth saving into an ISA before the tax year ends in April.
What do you need to know about cash ISAs?
A cash ISA will allow you to earn interest on your savings in a bank or building society without paying tax.
Like other savings accounts, you can opt for either easy-access or fixed.
Easy access accounts let you take out your money without paying a penalty, but the rate you get is likely to change.
Fixed-rate accounts will keep your money locked in for a certain duration (usually one, two or three years) and pay a fixed level of interest.
Currently, savers can put away up to £20,000 in ISAs tax-free.
Savings kept in an ISA will continue to earn interest tax-free until the money is withdrawn from the account.
The Sun asked Moneyfacts for all the best cash ISA deals on the market currently – here’s what they said…
The best easy-access deals on cash ISAs right now
Plum comes out on top for easy-access accounts, offering 5.05% interest with a minimum deposit of £100.
The interest on this account is paid monthly.
It’s worth noting that as this is an easy-access account, the interest rate could change.
Chip offers the next best deal at 5.03% – and you only need to deposit £1 to open your account.
Next is Moneybox, which has an interest rate of 5%.
However, there’s a much larger minimum deposit here of £500.
All of these accounts give intro bonuses.
Make sure that you read and understand all of the terms and conditions of the various accounts as the rules do differ.
For example, some easy-access accounts have limits on how much money you can withdraw and how often.
Others also require a notice period before you can take your money out.
The accounts from Tipton and Coseley Building Society and West Brom Building Society both have notice periods of 60 days.
The best deals on fixed-rate cash ISAs right now
Usually, fixed-rate cash ISAs will pay a higher rate than variable deals because they require savers to lock in their money for a set amount of time.
But we’re seeing the opposite currently because banks are anticipating further interest rate cuts from the Bank of England – meaning more people are tempted to lock in with the current savings rates.
If you’re considering a fixed-rate account, be sure this is the right choice for you and your money and read the terms carefully before going ahead.
If you do want to withdraw your money early from a fixed-term account you may have to pay a penalty.
The data obtained from Moneyfacts shows fixed one, two and three-year-plus accounts.
OakNorth Bank is offering the best one-year fix at 4.46%, with a minimum deposit of just £1.
It allows transfers in to the account and interest is paid monthly.
For two-year fixes, Hodge Bank comes out on top with a rate of 4.41%.
However you would need to put at least £1,000 into this account, and transfers in are not allowed.
If you’re looking for an even longer fix, Secure Trust Bank has a cash ISA with a 4.43% interest rate lasting until March 2028.
You would need to deposit £1,000 in and further transfers in are allowed.
How you can find the best savings rates
If you are trying to find the best savings rate there are websites you can use that can show you the best rates available.
Doing some research on websites such as MoneyFacts and price comparison sites including Compare the Market and Go Compare will quickly show you what’s out there.
These websites let you tailor your searches to an account type that suits you.
There are three types of savings accounts fixed, easy access, and regular saver.
A fixed-rate savings account offers some of the highest interest rates but comes at the cost of being unable to withdraw your cash within the agreed term.
This means that your money is locked in, so even if interest rates increase you are unable to move your money and switch to a better account.
Some providers give the option to withdraw but it comes with a hefty fee.
An easy-access account does what it says on the tin and usually allow unlimited cash withdrawals.
These accounts do tend to come with lower returns but are a good option if you want the freedom to move your money without being charged a penalty fee.
Lastly is a regular saver account, these accounts generate decent returns but only on the basis that you pay a set amount in each month.
