With only ten days left until the end of the tax year on April 5, time is running out for you to fully utilise your cash ISA allowance.
As we approach this critical deadline, it’s important to act fast, but there’s also a new challenge on the horizon that could trip you up if you’re not careful.
Why You Should Use Your Cash ISA Allowance Now
Your cash ISA allowance allows you to save up to £20,000 tax-free, so it’s a valuable opportunity that you don’t want to miss.
If you haven’t already used your full allowance, now is the time to make the most of it.
After April 6, the new tax year begins, and you’ll have the chance to use next year’s allowance as well.
However, be aware that this generous allowance is under threat.
Starting next year, it could be slashed to just £4,000, making it even more likely that you’ll face tax on savings.
This makes it all the more important to make the most of cash ISAs now, especially since all interest earned is tax-free.
Beware of New Tricks by Savings Providers
While you’re rushing to get your money into the best possible account, there’s a new trick many savings providers are using to lure you in with tempting rates.
Several providers, like Trading 212 and Moneybox, have recently upped their rates to around 5.28% and 5.26% respectively.
But here’s the catch: these rates come with a bonus that only lasts for three months.
It’s not uncommon for providers to offer a bonus on the interest rate, but now they’ve shortened the bonus period from a year to just three months. After that, the rate drops significantly.
For example, after three months, Chip’s rate drops to 4.32%, Trading 212 falls to 4.5%, and Moneybox reduces to 4.47%.
Consider Alternatives for More Stability
If you’re after a more stable option, you might want to look into accounts that don’t come with short-term bonuses.
For instance, Tembo offers a straightforward 4.8% without any bonus periods, making it a safer long-term choice if you’re looking to avoid the hassle of switching accounts regularly.
Though rates like 5.28% may seem enticing, once the bonus period ends, these accounts will likely offer rates closer to 4.5% or 4.6%.
In contrast, accounts like Kent Reliance are offering a steady 4.56% without any bonus periods, which might be a better bet for savers who want consistency.
App-Based Accounts and Changing Rates
There’s also fierce competition in the world of app-based savings accounts, which have been rapidly changing their rates to compete for your attention.
These apps are constantly adjusting their rates, sometimes as frequently as five times in the past few weeks, in an attempt to top the best-buy tables.
While this can mean potentially higher rates, it also brings the risk of having to switch accounts frequently.
Don’t Settle for Low-Rate Easy Access Accounts
Unfortunately, traditional high street banks still offer some of the worst deals for easy-access savings. Even after the drop in the Bank of England’s base rate last month, some of the best rates available from banks like HSBC are as low as 1.35% on flexible savings accounts, which is less than half the average rate of 2.84%.
For cash ISAs, HSBC offers a better 2.75%, but it requires you to add to the account each year.
Other banks, like NatWest and Barclays, offer rates that are more competitive but come with conditions or are set to decrease soon.
Take Action Now to Secure Your Savings
With so many rate changes happening and a limited window to use your cash ISA allowance, it’s important not to settle for low rates or delayed bonuses.
Move your money into an account that will maximise your interest and keep you ahead of any future cuts to your ISA allowance.
The end of the tax year is approaching quickly, and if you don’t act now, you might miss out on some valuable opportunities.