The amount of new money saved in cash ISAs has dropped by a third in the past year, with almost £20 billion less saved in the 2016/17 tax year compared with the previous 12 months.
Official statistics released today by HM Revenue & Customs show the total saved fell from £58.7 billion between April 2015 and April 2016 to £39.2 billion the following year, while 1.6 million fewer cash ISAs were opened.
The drop in the amount saved in cash ISAs essentially savings accounts where you never pay tax on the interest follows the introduction in April 2016 of the personal savings allowance. This lets basic-rate taxpayers earn £1,000 in savings interest outside an ISA before paying any tax, and higher-rate payers earn £500. For more on this see our Personal Savings Allowance guide.
Cash ISA rates have also been consistently lower than savings rates over the past year. The current best-buy easy-access ISA pays just 1.06% AER interest compared with 1.25% AER for the top easy-access savings account.
HMRC's figures also show that the total amount held in stocks & shares ISAs £315 billion has overtaken the total in cash ISAs £270 billion.
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Where can I get the best rate on my savings?
If you want to save in a cash ISA, you can currently earn 1.06% AER variable interest if you want easy access to your cash, or 1.3% AER fixed for a year, with Virgin Money.
In comparison, you can earn up to 1.25% AER variable with the top easy-access savings account from Ulster Bank, or up to 1.95% AER via a one-year fixed savings account with Atom Bank, so these may be a better option if you haven't used up your personal savings allowance.
Alternatively, it's possible to earn up to 5% interest on small amounts, via a current account or regular saver linked to a current account.