ISA savers up to £16,500 better off

Any account where interest is paid tax-free has to be the first port of call for hard-pressed savers – which is why you should always stash your rainy-day cash in an ISA. On top of that, investing in the best-paying ISA every tax year (which runs from April to April) will give you the very best shot at growing your money.

ISA savers onto a £16,500 winner

Illustrating this point nicely, our latest MoneySuperMarket research shows that, had you invested your full annual ISA allowance in the best-paying ISAs since the accounts first launched back in April 1999, you could have earned yourself £22,500 in interest alone.  That’s £16,500 more interest than you would have earned with a bog standard easy access savings account, taken over the same time. (That sum is worked out on higher rate – but standard rate taxpayers would be £14,200 worse off).

Without wanting to rub it in too much, here’s what you could have done with an extra £16,500:

10: Percentage of deposit you could have put down on a £165,000 property

23: Months’ rent you could have covered (based on UK average of £702 – excluding London)

48: Times you could have flown around the world (based on cheapest stopping ticket of £339)

1: Number of brand new Aston Martins you could have bought (OK, that’s the cost of a miniature one for kids with a top speed of 45 mph, but still…)

Keep saving to hit £100,000

Using up your full ISA allowance since April 1999 would mean you’d now be sitting on a savings pot of £93,602 (a quarter of this being the £22,500 interest). And if you continue to stash away your full ISA limit into the best account when the new tax year starts on April 6 (that’s £15,240), you’d have surpassed a total of £100,000!

So what if you’d have paid the same cash into a standard easy access savings account since April 1999?

Assuming the rate you earned was equivalent to the Bank of England Base Rate (savings interest that regulator, the FCA says is NOT uncommon) you would have accumulated a £79,383 savings balance by now, £8,343 of which would be interest. That’s if you’re basic rate taxpayer and once tax has been deducted.

If you are a higher rate taxpayer, it looks worse. You would have amassed a total savings balance of £77,187 but, of that, only £6,147 would be interest.

Just to drive home our point, this is what NON-ISA savers would have lost JUST in tax since April 1999:

£10,236: For higher rate taxpayers

£5,360: For basic rate taxpayers

‘Hunt out’ top rates

 It’s really important to hunt out the best rates you can on your ISAs – and all other savings accounts once that allowance has been used. Our head of banking, Kevin Mountford, said..

“It's really important to hunt out the best rates you can...”

“Savings rates – especially for those who haven’t switched in a while – are painfully low. However, no one should just accept a derisory deal from their bank. Instead hunt out the top rates, and in particular, maximise your tax-free ISA allowance to make your money work as hard as it can.”

He added:

“Now the cash ISA limit has been boosted to £15,000, making sure you get the best rate possible pays even more dividends, as you can earn it on nearly the triple the amount you previously could – and as it’s in an ISA it’ll be safely out of the taxman’s reach.”

There’s less than a month to go until the end of this tax year on April 5 – and if you don’t use your £15,000 allowance before then, you will lose it for good.

Check out this year’s MoneySuperMarket savings hub for everything you need to know about tax-free ISAs as well as some alternative savings deals (if you’ve already used your allowance) that you may not have thought of. You can search for the best Cash ISAs on our comparison tables.

Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

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