Issue #63: The Cash ISA War

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A new war has begun😭

Yep you read that right, a full-blown, head-to-head, intense battle is emerging on the finance scene.

Turns out banks and savings platforms are currently throwing punches to win your £20,000 annual ISA allowance. And for once, all of us are actually the winners (woop)! 🏆

So let’s chat about the all-out Cash ISA War of 2025.

What’s a Cash ISA again?

A quick refresher: A Cash ISA is simply a savings account where you don’t pay tax on the interest you earn.

That’s it.

No hidden fees, no confusing rules. Just tax-free saving.

(incase you were wondering, yes you do have to pay tax once you earn over a certain amount of interest in a normal savings account, depending on your level of income)

You can put up to £20,000 into one (or more) this tax year (2025/26), and the money stays tax-free forever.

Even if interest rates change. Even if you switch providers. Even if you forget your online banking password and have to reset it three times…

It’s still tax-free 🤑

Do you actually need a cash ISA?

Since 2016, the personal savings allowance has meant most people haven’t had to worry about paying tax on their savings.

The personal savings allowance means that:

• Basic-rate (20%) taxpayers can earn up to £1,000 in interest tax-free each year

• Higher-rate (40%) taxpayers get a reduced allowance of £500 per year

• Top-rate (45%) taxpayers get no allowance at all.

But with interest rates going up, more people are getting closer to these limits.

This is where an ISA might just come in handy…

• If you’re already paying tax on your savings interest, using a cash ISA is a NO-BRAINER. Stop paying more tax than you need to!

• If you’re getting close to the allowance limit, moving some money into a cash ISA will help you not go over that line.

• If you want to lock your money away, then GUESS WHAT?! there are fixed Cash ISA’s similar to fixed saving accounts!

If you’re still wondering if a normal savings account is better for you…

Right now the answer is probably not. But here’s a quick way to double-check:

Take the ISA rate you’re looking at, and multiply it by:

• 1.25 if you’re a basic-rate taxpayer

• 1.66 if you’re a higher-rate taxpayer

• 1.82 if you’re a top-rate taxpayer

If your normal savings account isn’t beating that number…

Then you’re earning more interest with the ISA🤑

Here are some things to keep in mind though:

• Rates are variable: Non fixed ISA interest rates can rise or fall, so keep an eye on your provider.

• Switching ISAs: If you want to switch, never withdraw the cash yourself otherwise you’ll lose the tax-free benefits. Instead, ask your new provider to handle the transfer via an ISA transfer form.

• Flexible ISAs: Some ISAs let you take money out and put it back in within the same tax year without using up your allowance. Others don’t - in those, every deposit counts, even if you've withdrawn earlier.

• ISA allowance: You get a £20,000 ISA allowance per tax year across all types of ISA’s COMBINED. Stocks and Shares, Lifetime, Cash, and Innovative Finance (the random one no-one knows about 😅).

Anyway back to the war - here are the top providers looking to take the top spot from one another.

Remember these rates are constantly changing so check the rate yourself before signing up!

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And that’s it for today friends. See you next week 😁

Got a question you’d like answered in next week’s newsletter? Just hit reply! Let me know your question and whether you’d like to stay anonymous.  

^{DISCLAIMER: None of the above is financial advice. This newsletter is strictly education and should not be taken as investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and always do your own research.}