What savers can do earlier than Labour targets our nest eggs: SYLVIA MORRIS
Take cover. Our savings are likely to be in the line of fire over the next five years as the new Labour government turns its guns on finding more money.
We will probably have to wait until the first Budget — which is likely to take place in September — to find out whether crucial savings allowances will be hit.
Easy pickings will be the amount you can earn in interest before paying tax, known as the personal savings allowance, and the upper £20,000 limit you can funnel into cash Isas.
Until then, it’s unclear if either are in the Chancellor’s crosshairs. But in the face of uncertainty, cash Isas should be every saver’s first port of call.
Cash grab: We will probably have to wait until the first Budget – which is likely to take place in September – to find out whether crucial savings allowances will be hit
This is because once your money is in your cash Isa, you won’t have to pay any tax on your interest.
Gone are the days when easy-access Isas paid much less than similar ordinary savings accounts.
The average rate on Isas is 3.33 per cent against 3.11 per cent on taxable accounts according to rate scrutineers MoneyfactsCompare.
Currently, you can save up to £20,000 each year into cash Isas, which work in the same way as ordinary savings accounts.
With top rates of 5 per cent, that’s up to £1,000 in tax-free interest if you max out your Isa this year — £200 sheltered from the taxman if you pay basic rate tax on your interest and £400 for higher-rate payers.
> Check the best cash Isa rates in our independent savings tables
So where do you start?
Move as much as you can from your ordinary easy-access account into a cash Isa. It might not benefit you now, but it could in the years ahead.
If you are among the millions of savers who have your easy-access money with your High Street bank, don’t just transfer it to their equivalent cash Isa; they pay dismal rates of as little as 1.2 per cent while others pay around four times as much.
Go for a flexible type of easy-access Isa as these prevent you from being penalised if you need to access your money.
The flexible accounts let you take money out and replace it without affecting your annual £20,000 Isa allowance — as long as you replace it in the same tax year. The best rate comes from the app-based Chip Cash Isa at 5.1 per cent
If you prefer an online account, then Ford Money at 4.6 per cent on £1 is a good choice. One big advantage is the bank pays the same rate to all savers in the account.
