As living costs rise and disposable income dwindles, Britons have been searching for savings accounts that offer the best rates of return on their investments. But with the end of the tax year fast approaching, financial journalist Martin Lewis urged viewers of ITV’s The Money Show who are “bigger savers” to “use” their ISA allowance now or “lose it”.
Mr Lewis said: “You need to use your 2022/23 tax year ISA allowance by April 5 – the end of the tax year – or you lose it.”
After telling viewers not to over-complicate it, Mr Lewis said: “A cash ISA is just a savings account where the interest is never taxed.
“You can put up to £20,000 in each tax year and once it’s in it stays tax-free year after year. So, you can put £20,000 in now if you’re lucky enough to have it, then on April 6, another £20,000, and in a year’s time, another £20,000.”
In the instance of that example, he said: “You’d have £60,000 plus interest protected from tax, which is why some people who have been doing it for years have hundreds of thousands of pounds protected from tax.”
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Mr Lewis continued: “They’re the type of people it’s best for. Cash ISAs are best for bigger savers.”
He added: “It’s not worth it if you have £5,000 to £10,000 or £500 or £10 because most people don’t pay tax on savings anyway.
“You can earn £1,000 of interest tax-free under the personal savings allowance if you’re a 20 percent taxpayer, and it’s £500 if you’re a higher-rate 40 percent taxpayer.
“Unless you have a lot of savings, you won’t earn that anyway. Normal savings account rates are higher, so you would earn more in those.”
Mr Lewis then went on to explain that the ISA deadline also applies to other ISAs, including those of stocks and shares.
He said: “For the same £20,000, you can choose to get tax-free in stocks and shares.”
Mr Lewis continued: “Lifetime ISAs for first-time buyers ages 18 to 39. For every £1,000 you put in, you get a £250 bonus towards a qualifying first property up of up to £450,000. You can put up to £4,000 in every tax year.”
The Money Show airs on Tuesday at 8pm on ITV.
