This tax year, get a new tax-free savings habit

You’ve got a tax-free savings allowance of up to £15,240 to play with this new tax year. But given that few of us can find sums like that upfront, a more achievable way to reach the target is to build up your ISA balance gradually.

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Nationwide has just launched a Regular Saver ISA which accepts between £1 and £1,270 a month – and is open to everyone.

What’s the deal?

The Nationwide Regular Saver ISA can be opened with just £1 either online, in branch or via the Nationwide Mobile Banking App. You don’t have to be an existing customer to qualify

Once opened, you can deposit any amount between £1 and £1,270 a month into your ISA (you can vary this amount month to month) – and you’ll get a (variable) tax-free return of 2.00% AER. 

When it comes to tax-free regular savings accounts that are open to all savers (ie, not just existing customers) this one sits top of the tables.

Unlike traditional regular savings accounts (which pay a higher rate in return for your monthly payment commitment) you can miss as many payments as you like with Nationwide’s Regular Saver ISA and make unlimited withdrawals – and you’ll still get the 2.00% tax-free return.

The 2.00% rate only lasts until April 2016, though so early opening is advised.

At the end of this tax year, whatever you’ve saved will be moved into Nationwide’s Instant ISA Saver. You won’t lose any of the tax-free benefits but the rate on that account is currently down at 1.25% (variable).

Who is it good for?

This account is ideal for anyone is looking open their first ISA and get into a regular tax-free savings habit. Because of the flexible terms, it’s also handy if the amount you can afford to put by changes from month to month.

Saving the maximum £1,270 every month for 12 months will take you to your maximum £15,240 tax-free allowance. But if you can’t afford that much, you can save anything over a £1 to keep the account ticking over. Then, any shortfall between your balance and maximum £15,240 allowance can be made up in the last month of the savings term, when Nationwide will remove £1,270 contribution cap.

Any catches?

This account is not suitable if you have existing ISA balances as it won’t accept transfers in – and imposes a maximum £1,270 a month contribution.

And, while it’s not a catch, remember the 2.00% only applies to your incremental balance throughout the year. For example, if you save the maximum £1,270 a month, you’ll only earn the 2.00% on that in the first month, and then on £2,540 in the second month – and so on.

For more on ISAs, including transfers, check out this short video…

What’s the verdict?

If you’re thinking of opening a savings account, an ISA should be your first port of call as it will allow you to keep all of the interest you make without giving the taxman a cut.

And the Nationwide Regular Saver ISA offers an ideal starter package as its system of maximum monthly deposits encourages you to gradually build up your savings pot over the course of 12 months – if you put in £1,270 a month for the next 12 months you’ll make up the full £15,240 allowance.

And even if you can’t afford to invest the maximum amount the investment limit is lifted on March 1, 2016, meaning you can top it up to meet this year’s limit before the end of the tax year on April 5.

Other similar ISAs to look at include…

Skipton Building Society Limited Edition Cash ISA: This account offers a recently-increased (and now market-leading in its camp) AER of 1.60% (variable). It can be opened with just £1 and savers can make unlimited withdrawals.

Sainsbury’s Bank Cash ISA: This offers an interest rate of 1.35% (variable) and comes with unlimited withdrawals. It requires a minimum investment of £500.

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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