08 March 2023 , 11:06
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Martin Lewis has issued an urgent warning for anyone with an ISA savings account.
ISA accounts let you save up to £20,000 each tax year without paying tax on the interest you gain.
But the end of the tax year is fast approaching, which means savers don’t have long left to make the most of their tax-free allowance.
Martin reminded ISA users of the deadline during his Martin Lewis Money Show Live broadcast on ITV last night.
He said: “You need to use your 2022/23 tax year ISA allowance by April 5 - the end of the tax year - or you lose it."
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However, not everyone will necessarily make the most of having an ISA.
You can currently earn £1,000 of interest tax-free under the Personal Savings Allowance if you’re a 20% taxpayer.
If you’re a higher-rate 40% taxpayer, the threshold is £500. This means ISAs are usually only best for savers with a lot of cash to put away.
Martin continued: "It’s not worth it if you have £5,000 to £10,000 or £500 or £10 because most people don’t pay tax on savings anyway.
"You can earn £1,000 of interest tax-free under the personal savings allowance if you’re a 20% taxpayer, and it’s £500 if you’re a higher-rate 40% taxpayer.
"Unless you have a lot of savings, you won’t earn that anyway. Normal savings account rates are higher, so you would earn more in those."
It is also worth noting that easy-access accounts are currently beating ISAs on the league table for best savings rates.
Paragon Bank and Yorkshire Building Society are both offering ISA rates of 3.1% but there are limits on withdrawals.
Cynergy Bank pays 3.05% and there are no caps on how many times you can withdraw your money.
For fixed-rate ISAs, several providers including Virgin Money, Shawbrook Bank and UBL UK are paying 4.11% for set periods ranging between two and five years.
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But the best-paying easy-access account from Chip, the rate is 3.4%, and the best fixed-rate account from SmartSave offers 4.51% for five years.
The upcoming ISA deadline also applies to other ISAs, including stocks and shares, Junior ISAs and the Lifetime ISA.
You can save up to £20,000 in one type of account or split the allowance across some or all of the other types.
If you have a Lifetime ISA, you can only pay £4,000 each tax year and you get a 25% bonus on this, so up to £1,000 each tax year.
Lifetime ISAs are for first-time buyers ages 18 to 39 or people saving for their retirement.
You can put up to £9,000 into a child's junior ISA without this affecting your own £20,000 limit.