Martin Lewis has issued a warning as time is running out to receive £1,000 free from the Government.
The Money Saving Expert founder has urged people to “use or lose” their ISA allowances before the end of the current tax year. This account is a tax-free savings product. It is capped at up to £20,000 for the 2021/22 tax year. This with a lifetime ISA can save £4,000 and benefit from a 25% bonus on top of the money you save from the government. That means you can get £1,000 free every tax year – or £2,000 free if there are two of you and both have a LISA account, which you can max out.
However, Mr Lewis has warned those looking to benefit from the program as there are only a few days left to participate as the current tax year ends on April 5.
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This means that in order to receive bonus payments from the government, you must transfer funds before April 6th, the new tax year. In MoneySavingExpert’s latest email, Martin said: “If you’re a first-time buyer, check out the 25% boost Lifetime ISA worth up to £1,000/year for your first home.”
Remember that the amount you pay into a LISA counts towards your total annual ISA allowance of £20,000. But when you’re saving for your first home, you won’t find a regular savings account from a bank or lender that pays 25% interest.
You can open a LISA account between the ages of 18 and 39. You can use this to make a deposit for your first apartment or for retirement provision. If you withdraw your money for reasons other than these, you will lose your bonus and pay a 25% penalty, which is around a 6% loss.
Regarding the ISA rates for cash, Martin made a somber statement that 85% of people are now better off dropping them. This is because cash ISAs currently generally have worse interest rates than regular savings accounts.
Instead of stashing your money in an ISA, you should focus on an account with the highest interest rates, he said. “Now, the personal savings allowance means that most interest on savings does NOT pay taxes,” Martin explained.
“Introduced in 2016, the PSA allows ordinary (20%) taxpayers to earn £1,000/year tax-free from all savings interest and higher (40%) taxpayers £500. At today’s top interest rate of 1%, you would need to save £100,000 to generate £1,000 in interest. Today, most people — over 19 out of 20, in fact — no longer pay taxes on savings.”
The best easy access account right now is Virgin Money, which pays 1% interest on up to £25,000. If you have a smaller sum, it pays 2.02% on £1,000. The second largest payer is Atom Bank, which pays 0.9%. If you can afford to lock away your money for a full year, Shawbrook Bank is the top player, paying 1.6% – but you must deposit at least £1,000.
JN Bank offers you 1.96% on their two-year fixed account if you deposit at least £1,000, or the best five-year fix is Monument at 2.4%. In comparison, the best accessible cash ISA is Paragon and pays 0.8%, while OakNorth Bank’s 1-year fixed cash ISA offers 1.28% interest and a 2-year UBL UK pays 1.6%.