As the tax year draws to a close, there are only ten days left to use up your full cash Isa allowance.
If you haven’t already done so, now is the time to take action before the opportunity slips away.
The allowance for the current year is up to £20,000, and I strongly suggest using as much of it as you can before the end of the tax year on April 5.
From April 6, you can start using next year’s allowance as well. But here’s a heads-up: this valuable allowance is under threat.
Starting next year, it could be slashed down to just £4,000.
This potential reduction makes cash Isas even more precious, as all the interest you earn in these accounts remains tax-free.
Beware of Savings Providers Offering Short-Term Bonuses
While there are a lot of new accounts popping up with increased rates, many come with a catch that could trip you up if you’re not careful.
Many of these accounts now offer a bonus rate, but here’s the catch – the bonus only lasts for three months.
For example, both Trading 212 and Moneybox increased their rates to 5.28% this week, and Chip is offering 5.26%.
However, once the bonus period ends, you’re left with much lower rates.
Trading 212’s rate drops to 4.5%, while Chip’s will fall to 4.32%. So while the initial rates may look appealing, they may not be the best deal in the long run.
The Perils of Bonus Rates and App-Based Accounts
Gone are the days when bonuses lasted a full year. These days, the bonuses only last for a few months.
If you want a more stable rate, you might consider accounts that don’t offer any bonus.
For instance, Tembo is offering a solid 4.8% without any bonus gimmicks, which could be a better option for those seeking consistency.
Some banks, like Zopa Bank, have also reduced their bonus periods from a year to just three months.
While they’ve raised their rates, once the bonus expires, the rate drops significantly to 3.8%.
Why You Shouldn’t Settle for Low Rates
It’s been two years since the Treasury Committee criticized big banks for their poor savings rates, and sadly, the situation hasn’t improved much.
After the Bank of England base rate fell last month, the best rates offered by regular easy-access accounts have also dropped significantly.
For example, HSBC’s Flexible Saver account offers just 1.35%—less than half the average rate of 2.84%.
For easy-access cash Isas, the best rate from HSBC is 2.75%, but that’s only if you add to the account annually.
Other options, like Barclays’ Rainy Day Saver, offer 4.87% on the first £5,000 but will drop to 4.61% on May 6.
Make the Most of Your Savings Before It’s Too Late
If you’re currently using one of these low-rate options, it might be time to make a change.
With the possibility of further rate cuts and the ever-changing landscape of savings accounts, now is the best time to take full advantage of the higher rates available before they disappear.
Move your money while you can, and make sure you’re getting the best deal possible.