Home Money Cash rush Isa predicted £54bn of fixed-rate tax-free money will mature in the coming months – here’s why you should act early…

Cash rush Isa predicted £54bn of fixed-rate tax-free money will mature in the coming months – here’s why you should act early…

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Cash Isa boom: Savers rushed to open tax-efficient accounts last year to protect their income

More than £50bn of cash Isa savings held in term accounts will mature at the end of the financial year, according to new figures.

Analysis of CACI data by Paragon Bank shows that £53.9 billion held within fixed-rate cash Isas will mature between January and April.

This huge sum includes £36.4 billion held in a one-year fixed account along with £15 billion in open accounts with a term of between 18 months and two years.

Last year, savers rushed to protect the rise in tax on accrued interest, with HMRC figures showing £10.4bn is expected to be generated in the current financial year through non-compliance. the Personal Savings Allowance, that is, about 10 times the £1.4 billion recorded in 2021. 22.

As a result, growth in Isa balances far outpaced non-Isa variants between January and October 2024, according to data from CACI which compiled savings deposits from 40 leading savings providers.

Isa cash balances increased by £38.5 billion, compared to £9.5 billion for non-Isa accounts.

Cash Isa boom: Savers rushed to open tax-efficient accounts last year to protect their income

“Last year was one of the busiest Isa seasons ever,” says Derek Sprawling, chief savings officer at Paragon Bank.

“At Paragon we experienced a record day on the first business day of the new fiscal year.”

Will fixed Isa savers get a better or worse deal?

Savers looking to protect their money once accounts come due in the coming months are unlikely to see better returns than a year ago because rates have fallen across the board following cuts to the Bank of England’s base rate.

Shawbrook Bank currently tops the list of the best one-year fixed deals offering savers 4.53 per cent interest on balances over £1,000.

It is followed by Virgin Money, Close Brothers Savings and Secure Trust, offering 4.52 per cent.

It marks a significant drop in the rate offered for a one-year fixed cash Isa in January 2024, when Virgin Money offered 5.25 per cent interest.

Shawbrook Bank (5.01 per cent), Dudley BS, Post Office Money, Kent Reliance and Punjab National Bank (5 per cent) offered significantly more.

Similarly, fixed two-year cash Isa deals are not as generous as those from January 2024, with the best deal currently on offer offering 4.43 per cent from Hodge Bank and Castle Trust Bank.

It is followed by Kent Reliance, Secure Trust and Close Brothers Savings, offering 4.42 per cent.

However, savers who fixed their two-year bonds in January 2023 may find better rates, as the best deal came from Barclays, which paid 4 per cent.

Rachel Springall, of Moneyfactscompare, said: ‘Savers should be proactive in shopping around for the best rates as the New Year begins, particularly as rates have fallen on both fixed and variable accounts over recent months.

‘Those with bonds maturing should note that yields are lower than those invested a year ago, but those with a bond maturing in five years will be happy to see rates are significantly higher now by comparison.

‘Challenger banks are working hard to inject healthy competition into the market, with the intention of attracting funds for their future loans.

“However, there has been a mix of hikes and cuts to the cap rate tables since early 2025.”

What to do if your cash Isa expires soon

For savers whose cash Isa expires before April, Sprawling recommends they use their £20,000 Isa allowance before the end of the tax year.

If you’re looking to open an account or transfer your savings to benefit from higher rates, be sure to act early, says Sprawling.

‘To better manage large volumes, savings providers may withdraw popular products from the market or make certain products available only to existing customers.

“So if savers are thinking about opening a new Isa this tax year or transferring an existing Isa balance to a new account, don’t leave it too late.”

If you are considering transferring your Isa balance, do not withdraw it yourself or you will lose the tax advantage that comes with an Isa.

Sprawling also advises savers to look at how their income level affects their tax situation and how much of the Personal Savings Allowance (PSA) they are entitled to.

Basic rate taxpayers can earn up to £1,000 of tax-free interest income, while higher rate taxpayers can deposit £500. Additional rate taxpayers are not entitled to any of the PSAs.

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