Coventry BS launches market-leading ISA to rival top easy-access savings accounts
Coventry Building Society has launched a market-leading cash ISA paying 1.5% – which puts it on par with similar top easy-access savings accounts.
Coventry Building Society's cash ISA pays 1.5% AER variable interest – including a fixed annual 0.35% bonus until 31 July 2020 – which is the highest rate we've seen since February 2016.
You can only open it online, with a minimum of £1, and manage it online, by post or in branch.
A cash ISA is basically a savings account which you NEVER pay tax on. Everyone in the UK aged 16 or over gets an ISA allowance at the start of each tax year – for 2018/19 it's £20,000, but you have to use it by 5 April.
See our Top Cash ISAs 2018/19 guide for more information.
How does the ISA compare?
Coventry's new ISA has taken the top spot in our best easy-access cash ISAs, pushing Virgin Money off the top spot.
Interestingly, Coventry's rate is on par with the top easy-access savings rates from Marcus and Cynergy Bank, which both pay 1.5% (including temporary bonuses).
It's worth noting Family Building Society's easy-access savings account offers 1.51%, but it requires a minimum deposit of £15,000 and you can only add to it until the funding cut-off window of 29 March. So it's not true easy-access.
Is it worth opening a cash ISA?
ISAs used to be a lot more attractive as you didn't pay tax on any interest earned from them, while you did pay tax on interest earned from traditional savings accounts.
But since the introduction of the personal savings allowance (PSA) in 2016, which allows every basic-rate taxpayer to earn £1,000 interest each year without paying tax on it (higher-rate taxpayers can earn £500), most no longer pay tax on their savings interest. So it generally comes down to which account earns the highest rate.
Now that the Coventry BS ISA pays the same rate as the equivalent easy-access savings accounts, if you've got £20,000 or less to save then you've nothing to lose by putting your money into the cash ISA – that way your interest is shielded from tax if interest rates rise or other changes in circumstances mean you go over your PSA.
Plus if you're a top-rate taxpayer or you know you're going to go over your PSA limit, there can be big tax advantages of saving in a cash ISA:
- Basic-rate taxpayers over the PSA limit. For every £100 interest you earn in normal savings you only get £80, whereas in an ISA you get the whole £100. Therefore the normal savings rate would have to be 25% higher for it to beat a cash ISA.
- Higher-rate taxpayers over the PSA limit. For every £100 interest you earn in normal savings you only get £60, whereas in an ISA you get the whole £100. Therefore the normal savings rate would have to be 66% higher for it to beat a cash ISA.
- Top-rate taxpayers. For every £100 interest you earn in normal savings you only get £55, whereas in an ISA you get the whole £100. Therefore the normal savings rate would have to be 82% higher for it to beat a cash ISA.
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