It's a question for every saver: is it still worth putting your money into cash Individual Savings Accounts? These tax-efficient savings vehicles, which were introduced back in 1999, quickly became a popular way to grow pots of money free of income and capital gains tax.But they started losing out to more traditional savings accounts after the UK Government introduced the personal savings allowance in 2016.
This policy change, which allowed most people to earn a certain amount of interest tax-free each year, reduced some of the cash ISA advantages.
ALLOWANCE SHAKE-UP
It means basic-rate taxpayers don't pay tax on the first £1,000 of interest, while higher-rate payers can earn £500 tax-free, according to Sarah Coles, head of personal finance at Hargreaves Lansdown.
"Savings rates have been so low that most people would have needed an enormous sum before they had to worry about tax on their interest," she says. "However, rising rates have tipped the balance for a lot of people."
The Bank of 20 England's base rate was cut to 0.1 per cent in March 2020 and it was still below 1 per cent during the early months of 2022.
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