It’s not too late to take advantage of your Isa allowance. Here are the best options for your cash.
There are only a few days left until the end of the tax year, when any unused individual savings account (Isa) allowance will disappear. But if you haven’t yet paid into a cash Isa this year, it isn’t too late.
You have until midnight on 5 April to invest your 2017/2018 Isa allowance of £20,000. Unlike many other tax allowances, unused Isa allowances can’t be carried over to other tax years, so use it or lose it. If you just want somewhere to dump your Isa allowance quickly while you decide where you really want it (once the money is in an Isa, you can transfer it to a better-paying cash Isa or move it into an investment or innovative finance Isa), then you could go for an instant-access Isa. (Note that it’s generally best not to wait until this point in the tax year to do this, as you are not benefiting from a full year’s worth of interest-free growth.)
The best rate you can get with instant access is from Nationwide, which is offering 1.3%, but note that you can only make one withdrawal a year. This account accepts transfers from existing Isas and has no minimum deposit. If you think you might need to access your cash more frequently than that, then Paragon has an instant-access Isa paying 1.25%.
However, always make sure you check with your own bank too, as some offer special Isa accounts to loyal customers. For example, Nationwide customers can get a single-access Isa paying 1.4%. But at the same time, don’t just assume your bank’s loyalty rate is worth bothering with. HSBC offers its Premier customers an instant-access Isa paying 0.75%, which is more like a kick in the teeth than a reward, given that there are numerous other cash Isas that beat that rate.
You can also boost your interest rate by going for a fixed-rate account. By law, Isa providers have to give you access to your money, so even a long-term fixed rate bond has to allow withdrawals. This means you could grab that higher interest rate and still move your money if interest rates rise, or you simply need to access your cash. Just make sure you factor in how any withdrawal penalties could affect your overall return. The top rate available on a cash Isa is Halifax’s five-year fix, which pays 2.25%, but access your money early and you’ll lose 365 days interest. The minimum deposit is £500 and the account also accepts transfers from existing Isas. The added benefit of this account is that it is eligible for the Halifax Savers Prize Draw, as long as you have at least £5,000 in the account. The draw takes place every month and you can win up to £100,000.
If you think you may want your money early, a better option may be Virgin Money’s four-year bond. This only pays 2.05% interest, but the withdrawal penalty is far lower, at 120 days’ interest. Another option may be to go for a one-year bond, so you have the freedom to move your money penalty-free if the interest rates are looking better this time next year. Al Rayan Bank is offering the best one-year bond with a rate of 1.51%.
Also, don’t forget your children – under-16s can have a Junior Isa (Jisa), with an allowance of £4,128 this tax year. Money paid into a Jisa can’t be accessed until the child turns 18, when it will be transferred into an adult cash Isa in their name. For young children, an investment Jisa is probably better as it has a long time to grow, but if you do want cash, the best rate is 3.5% from Coventry Building Society. The account can’t be operated online; for that, Nationwide is best, at 3.25%.
Pocket money… church collection plate 2.0
• The NHS is “hiding care cash”, says Ali Hussain in The Sunday Times. A survey has found that 87% of those aged 45-60 – the group most likely to be taking care-funding decisions for their parents – don’t know about NHS continuing healthcare. This covers the care fees of people with “complex medical needs” and is not means-tested. In short, says Hussain, it’s possible that thousands of elderly people are missing out on state funding for their care because they’ve “no idea it exists”.
• MPs have delayed plans to scrap childcare vouchers. The scheme was meant to close to new entrants on 5 April, to be replaced by tax-free childcare, but the launch of the new system has now been delayed by six months. MPs have asked for a “rethink”, saying that the new scheme may disproportionately benefit the rich, says Ruth Lythe on This is Money. Childcare vouchers save parents up to £930 a year, while tax-free childcare allows families to claim up to £2,000 a year per child. While vouchers allow you to save both income tax and national insurance using salary sacrifice (savings of either 32% or 42%), the new scheme requires you to pay money in, then get a top-up bonus to refund basic-rate tax (20%).
So while the maximum you can save is higher with the new scheme, for higher- and basic-rate taxpayers who don’t spend a lot on nursery, or breakfast and after-school clubs, the new system is likely to be far less generous. The new scheme is being “promoted slightly disingenuously by the government”, says Lythe: to save £2,000 you would have to spend £10,000 a year on childcare.
• “The centuries-old ritual of passing round the church collection plate is going digital”, reports the Financial Times, as the Church of England reveals it has plans to use contactless payment technology for donations. From this summer, around 40 churches will get handheld terminals to process card payments.