Archive: MoneySavingExpert's Money Tips Email

Use it NOW or lose it...

The top easy-access cash ISAs pay up to 5.6%, smashing normal savings, so your money's nicer in an ISA
Do it NOW, the tax year ends on Saturday

Pop the champagne corks, watch the fiscal fireworks and sing: "Should auld ISAs be forgot, and savings left to die..." as it's the new (tax) year on Sunday. And that means this SATURDAY, 5 April, is the last day you can use this year's ISA allowance, though sooner is safer to avoid admin delays kiboshing things.

So, with urgency, I want to take you through... how ISAs work | top easy-access cash ISAs | top fixed cash ISAs | how tax on savings works | boost existing ISA rates | FAQs including... 'Will the Chancellor cut cash ISAs?' | Lifetime ISAs, Junior ISAs & Shares ISAs

PS: There are many other April deadlines - see my Don't be an April fool: 17 must-dos now from this email a fortnight ago (most are still live).

Each tax year, every UK adult (aged 18+) gets a £20,000 ISA allowance to put money away tax-free in savings via a top cash ISA, or in investments via a shares ISA. You can have all £20,000 in one, or split it across both types (there are other niche ISA types too).

If you don't use this year's ISA allowance, you lose it on Saturday (ie, it can't be carried over). Yet once it's in a cash ISA, it stays tax-free year after year, so some who've maxed out every year's allowance have £100,000s protected from tax. Not used this year's ISA and have the money?

- You could put £20,000 in ISAs to protect from tax by SATURDAY.
- And another £20,000 in ISAs from SUNDAY (the new tax year).

Even if you've far less, if you're going to use your ISA allowance, use this year's, just in case you unexpectedly have more next.

Understanding how ISAs work is a piece of cake... (I've been doing this analogy since 2001, and it's not stale yet, watch my new why ISAs are a piece of cake video explainer) Picture a cake, let's say a chocolate cake for cash savings (though it could equally be a strawberry cake for shares). Normally it's just sitting there, so the tax collector can come and take a bite. But think of an ISA wrapper like a protective piece of clingfilm you can wrap around some of the cake. Once your cash is inside, nothing changes - the cash in savings is still cash in savings (so a cash ISA is just a savings account), the only difference is... now the tax collector can't eat any. See our full ISA guide for a detailed Q&A.

A cash ISA is just a savings account you can put up to £20,000 in per tax year where the interest is NEVER taxed. Just like normal savings, they can be easy-access, notice or fixed accounts - the only difference is they're inside a tax wrapper.

The interest earnt in it DOESN'T count towards your Personal Savings Allowance either (the interest you can earn tax-free each year from any form of savings), so a cash ISA is an extra allowance (more on  how savings are taxed below).

Rates are changing rapidly. The team have updated the tables below for me at the last moment before we send the email (I'm filming). Even so, do click the guide links at the top of each column, where we'll keep updating any rate changes.

Top cash ISA rates currently BEAT top normal savings. This used to be unusual, but over the last year it's become commonplace. So even if you wouldn't pay tax on interest, if you want easy-access, you may as well save in a cash ISA as the rates are higher.

For those who will pay tax on savings interest, the impact is heightened. The top cash ISA standard rate is 4.8% - compare that to what you'd get in the top 4.75% savings rate after tax, that's equivalent to just...

Fixed cash ISAs have one advantage over normal fixes. Top fixed cash ISAs rates are lower than normal savings rates. Of course, for those who'd pay tax on the interest (or want to protect money in case they will in future), they're still far better. If not though, on rate alone, normal savings win.

Yet while normal fixed savings require you to lock the money away to get the guaranteed rate of interest, cash ISAs can't lock your savings away, even in fixes. So you can access your money, normally by closing the account, though you will need to pay an interest-rate penalty (90 or 180 days of interest, or more for longer fixes).

So if you're mostly happy to lock money away, but there's a slim chance you'll need to access it, cash ISA fixes are a get-out-of-jail-free card.

Many with old cash ISAs either had poor rates to begin with, or have seen the rate plummet after the first year or so. So check your rate now. If it's worse than those above, ditch & switch! To do that, don't just withdraw the money, as then it's no longer within an ISA. Instead, transfer it. All the best-buy cash ISAs above allow ISA transfers in.

• To transfer to a higher-rate cash ISA. Open a new one. You can do this even if you don't want to add new money in (say you've already used your ISA for this year) - the application form will ask you about transferring cash ISAs. You can transfer some of your old cash ISAs over, or all of the money held in them - it's your choice.
  
  Do it this way and it moves it for you, usually within a few weeks. There's no deadline on this, your money is already in an ISA, so the tax-year end is irrelevant as you're not using any new allowance. If you already have an ISA you want to transfer it into, if it allows transfers (you'll need to check), just ask for a form to do it.
  
  Julie emailed us in Feb: "I've been watching Martin's show for a long time and subscribing to the weekly emails even longer. My time has been well spent - I've checked our cash ISA rates, which will drop to 3.5%. I have now transferred the balances to 5.03%, great job. Thanks all at MoneySavingExpert!"
  
  
• Got a fixed-rate cash ISA? Check if you can ditch, switch & gain. If your fixed rate is low compared to the best today, you still have an option. You can transfer it to a new provider and pay your current fixed ISAs' interest-rate penalty for early withdrawal.
  
  Our fixed-rate cash ISA switch calculator works out if it's worth it for you. A year-ish ago, Warren told us: "Took Martin's advice and switched two low-paying fixed ISAs with Kent Reliance into its 1-year fix. Cost me £118 in penalty charges, but they will generate £880 in the new ISA."

I've been doing shows on cash ISAs in the run-up to the deadline, so thought I'd compile the most frequent questions (oh & I'll answer 'em too!):

Q. Should I stop saving in cash ISAs because Rachel Reeves is going to start taxing them? I've heard this question asked many ways, but this is the most worrying formulation - as it's far from what's being talked about. The only proposal I've heard (and it's no more than that) is that in the Autumn Budget, the Chancellor may reduce the amount you can put into cash ISAs (some say to £4,000). Indeed I was asked about this when giving evidence at the Commons on LISAs.

The idea is to do it to try and encourage people to invest, hoping people will choose shares ISAs instead (I don't think that'll work for most, many will just keep saving but pay tax). Yet there has been no talk of stopping the tax gains from money in a cash ISA. If anything, the fact there's a chance future limits may be cut is a reason for maxing out cash ISAs now, to protect what you can.

Q. Is the interest paid into an ISA part of your £20,000 cap? No. Any interest paid stays within the ISA wrapper, but doesn't form part of your £20,000 limit. The limit is on what YOU put into the ISA each tax year. You didn't put the interest in, the savings provider did. So you're fine.

Q. If you can choose between receiving interest monthly or annually, which is best? If you want to access the cash, monthly is best because you can access it more regularly. If not, there's no difference. I suspect you're asking me because the same account will list different rates, eg, one 1yr fix pays 4.52% annually or 4.43% monthly.

This is a technical, not a real, difference. The annual rate includes compound interest. The monthly rate has to assume you withdraw the interest each month, so you don't get interest on the interest. If you don't withdraw it, it would compound and you'd have the same amount.

Q. Is it worth opening a cash ISA even if you aren't going to use your full allowance of £20,000? It's just a savings account you don't pay tax on, so if the rate is higher than normal savings, even if you won't pay tax on interest, then put what you have in there. It may also mean that if you did come into more money in future, you've got more room to protect that too.

Q. Can I have multiple different cash ISAs in the same tax year? Yes. You've always been able to from past years' ISAs, but since last April, you've been able to open more than one in the current year too (eg, a fix and an easy-access) just as long as you're not putting in more than £20k in total.

Q. Is it worth combining all my old cash ISAs into one place? Yes, then they can all be with the top payer. Plus it makes it far easier administratively, as then they're all in one place, and if the rate drops in future, it's simpler to transfer in one go. There are two main exceptions...

- If you wanted different types on the go (say, easy-access and a fix).
- If the total is over the £85,000 savings safety limit, in which case you may want to spread it across a couple of providers.

Q. How do I combine my fixed-rate cash ISAs if they all mature on different dates? If that's your aim, for an easy life when the first fix matures, transfer it to a top-rate easy-access cash ISA, then keep transferring the others into the same one when they mature. Once they've all matured, you could transfer all into a fix.

Of course, the time taken means there's a risk you might miss the best fix rates, but the current easy-access rates pay slightly more than fixes anyway, so hopefully it will work out well for you. You can't do it directly to a fixed cash ISA because you have to fund them within the first 30 to 90 days.