New market-leading ISA launches
With only a few weeks to go until the ISA allowance deadline, Coventry BS is now offering 1.50%, which is only 0.01 percentage points shy of the market-leading easy access non-ISA rate from Family Building Society.
You can set up a Coventry ISA with as little as £1 but it can only be opened online.
The fixed rate includes a bonus of 0.35% until 31 July 2020 so you’ll need to make a note of this date and switch if the deal is no longer competitive.
Competition has been slowing improving in the easy access ISA space, with the best deal now paying 0.20 percentage points more than this time last year.
ISA rates in general have been poor for the past few years following the introduction of the personal saving allowance (PSA) in 2016, which lets basic rate taxpayers earn up to £1,000 (£500 for higher rate taxpayers) in savings income tax-free.
As tax-free saving was one of the key benefits of the cash ISA, their appeal declined with the arrival of the PSA and so too did the rates on offer.
But there are signs of a turnaround.
“Since the start of 2019, ISA providers have gradually launched new deals in advance of a peak season, and right now it is hoped that competition will increase leading to even more deals as we head closer to the new tax year,” said Rachel Springall, finance expert at Moneyfacts.
ISAs v savings accounts
The PSA means most people no longer pay any tax on their savings so for them, the best rate should be the main consideration.
At the moment, rates are better on non-ISA deals, but the situation could change, especially if competition among ISA providers continues to heat up.
For some people, however, a cash ISA could be a better option. Additional rate taxpayers (45%) who earn above £150,000 are not eligible for a PSA but they can still save tax free in an ISA.
Also, people with big savings pots who go over their PSA threshold can save into an ISA tax-free (cash ISAs do not count towards your PSA, they can be held in addition).
It’s also worth noting that the PSA is not guaranteed to be around forever, and if interest rates start to increase, savers could soon start to breach their £1,000 or £500 PSA limit.
Savers have until the end of the tax year – 5 April – to use their 2018/19 ISA allowance, which is £20,000. The ISA allowance will not change for next year.