- Shelter your cash from taxes with these ‘best-buy’ cash Isas
- But don’t forget that cash typically loses you money over the long term
The priority for your individual savings account (Isa) allowance should usually be a stocks-and-shares Isa, in order to protect your investments from capital gains tax and dividend tax. But you may not always have the full £20,000 a year to invest, particularly if you prefer to put a significant amount into your pension.
If that’s the case, a cash Isa can be a handy option if you are looking to add to your cash balance, for example ahead of a big purchase, or to transfer your existing savings into a tax wrapper. Over the past couple of years, the increase in interest rates has improved cash returns but also pushed a lot of savers above their tax-free personal savings allowance. This allowance is £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and zero for additional-rate taxpayers. HMRC figures obtained by AJ Bell estimate that the number of taxpayers owing tax on their savings interest more than tripled from 800,000 in the 2020-21 tax year to 2.7mn in 2023-24.