Cash ISA interest rates hit 14 year high – savers can get 4.26%
As the tax year end approaches, many savers will be wondering how to use up their £20,000 ISA allowance. With the interest rates on cash ISAs at a high, it may be the perfect time to consider using the account for tax-free interest.
As rates are climbing, providers are offering even more ways to attract someone’s cash.
Data from Moneyfactscompare found the average easy-access and notice account rates rose in February, with the former now at 2.02 percent – the highest since February 2009.
The latter rose to 2.96 percent, the best since January of the same year.
It is an astonishing rise from two years ago, when the average easy-access ISA rate was at 0.23 percent.
ISA rates are slightly ahead of the average easy-access account, which pays 1.85 percent.
The top easy-access cash ISA accounts are from Cynergy Bank, Paragon Bank and Teachers Building Society, which all pay 3.2 percent, based on an initial lump sum of £20,000.
The average one-year fixed ISA rate rose to 3.56 percent (its highest since December 2008), while longer-term rates were around 3.72 percent, Moneyfacts found.
However, top rates are even better. The top one-year fixed offer is tied between Charter Savings Bank and UBL, which both pay 4.01 percent based on a £20,000 lump sum.
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For those putting their cash away for longer, Virgin Money has a two-year fixed paying 4.26 percent while the 18-month fixed from Santander pays 4.25 percent.
Rates on cash ISA accounts are crucial in the final weeks of the financial year, with investors encouraged to squirrel away as much as they can in a tax-free ISA.
Coventry Building Society is offering their highest ever limited access rate available on the Hargreaves Lansdowne platform – plus a £100 cash bonus.
Savers will need to add £10,000 or more to the product by debit card between February 14 and May 3, 2023 to qualify for the bonus.
People could earn a return of up to four percent in the first year.
The four percent figure assumes the rate won’t change and is based on the rate of three percent AER.
For more information, people can visit the Hargreaves Lansdown website.
Earning more interest in non-ISA accounts will push savers closer to breaching their personal savings allowance (PSA).
This is the total amount of interest you can earn across your savings accounts, on top of any which falls into your personal allowance or starting rate for savings, without paying tax.
Currently, basic-rate taxpayers have a PSA of £1,000 each year, higher-rate taxpayers have £500, and additional-rate taxpayers have no allowance.
Rachel Springall, finance expert at Moneyfactscompare, said: “As a new tax year looms it is encouraging to see interest rates have improved across Cash ISAs for those savers who still need to utilise their ISA allowance.
“The savings market overall is going through a buoyant period thanks to a mix of rate competition, base rate rises and the rush of launching enticing offers for savers looking for a deal before the 2023/2024 tax year begins.”
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