Don’t accept lower than 4% in your new money Isa this tax 12 months – earlier than Reeves slashes the allowance to £12,000, says SYLVIA MORRIS

All savers have a fresh £20,000 Isa allowance from this week thanks to the start of the new tax year.

I’d fill yours soon to earn as much tax-free interest as possible.

That’s because this is the last year for most that you can put your £20,000 allowance into a cash Isa.

From this time next year, under-65s will have a far slimmer £12,000 limit for tax-free savings.

But, before you deposit your money, make sure the interest rate on offer is at least 4 per cent, or 4.3 per cent for a one-year fix. 

Rates have gone up in recent weeks, so deals that looked good not long ago could be trumped by newer alternatives.

Isa allowance: From this time next year, under-65s will have a far slimmer £12,000 limit for cash Isa tax-free savings

If you want to keep your money close at hand in an easy-access account, then go for a flexible Isa.

These allow you to take money out and replace it in the same tax year without the repayment counting towards your allowance. It is up to providers to decide to offer this flexibility – and many do not.

Plum – which offers a near top rate of 4.6 per cent – does. The rate on this app-based account includes a 2.06percentage point bonus which is paid for the first year.

But a word of warning: ensure you make a diary note once you have been paid your bonus after a year as the rate drops to just 2.54 per cent.

And don’t transfer your money to a better account elsewhere during the first year without doing the sums. If you do, you will forfeit all the bonus interest earned so far.

I would personally go for Trading 212, which has just upped its rate to 4.61 per cent, including a lower 1.01-point bonus for a year. 

It adds the bonus monthly, but is only available to new customers. The top online account is 4.3 per cent from Vanquis Bank, but you only earn this rate if you make three or fewer withdrawals a year.

I don’t include accounts which pay a bonus or restrict your withdrawals in my star buys but I do show you what is on offer. 

The best one-year fixed-rate Isa is 4.5 per cent from HSBC, but you need a current account with the bank to open one. 

Don’t settle for anything less than 4.3 per cent which is available online, by post and on the high street, such as Paragon Bank at 4.4 per cent (for 15 months) or Nationwide at 4.35 per cent.

Should you go for a variable-rate account which could go up in coming months – but may also go down? Or head to the safety of a fixed rate where you know exactly how much interest you will see?

There is no easy answer. It depends on the Iranian war, as it will affect interest rates.

The Bank of England could raise the base rate from its current 3.75 per cent to dampen ballooning inflation.

Fixed-rate accounts have shot up in the last month. So, if you see a good rate, you might prefer to fix now and know exactly how much tax-free interest you will see over the term. But I’d be inclined to stick to the shorter term.

Ten years of the personal savings pot 

The personal savings allowance celebrates its tenth birthday this week. 

It permits basic-rate taxpayers to earn their first £1,000 in ordinary, non-Isa savings accounts without paying tax.

 Everything above that is taxed at their income tax rate of 20 per cent.

Higher-rate payers get a £500 allowance while additional 45 per cent payers get no allowance at all.

But the personal savings allowance has been frozen since it was introduced in 2016.

If you put £25,000 into a top-paying one-year bond at 4.6 per cent at the end of March last year, you would have earned £1,150 interest for the year. 

That would have triggered a tax bill of £30 for basic-rate payers (20 per cent of the £150 over your allowance) and a substantial £260 (40 per cent on £650) for higher payers. 

Your bill would have been even bigger if you had used your personal savings allowance elsewhere.