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Savers rushing to make the most of their tax-free Isa allowance can beat the best easy-access Isa in our independent best buy tables by opening a tax-free account with Hargreaves Lansdown’s Active Savings savings platform.
It is again offering new customers a £25 bonus sign up for an account* from today.
Currently, the best easily accessible Isa rate it has on the platform is from Charter Savings Bank, which offers 5.03 per cent.
However, on a balance of £10,000 – the minimum required to qualify for the bonus – this increase works out to a best buy of 5.28 per cent.
Give your Isa a boost: Hargreaves Lansdown is offering customers a £25 sign-up bonus
This rate is better than the best deal on an easy-to-access cash Isa, offered by Plum*, pay 5.15 percent
There is fierce competition between providers in the easy-to-access Isa money market as the end of the tax year approaches, but especially from app-based newcomers.
Plum launched an easy-to-access cash Isa last week, knocking rival Chip off the top spot. Chip launched an easy-to-access cash Isa* paid 5.1 percent two weeks ago.
Not long before, Moneybox increased the interest rate on its easy-access cash Isa to 5.11 per cent.
At the moment, the most accessible Isa rates seem to be reserved for those who don’t mind downloading an app and managing their Isa money from their phone or tablet.
For those who don’t want to download an app, Hargreaves Lansdown’s online platform can be a good middle ground.
Kent Reliance has an easy-to-access Isa that pays a rate of 5.01 per cent and can be opened online or in a branch.
To receive the Active Savings Bonus, savers must open an Active Savings Account via this link* and deposit an account with a minimum of £10,000 before October 24, 2024.
That means you can sign up for an account now and wait until the new tax year to fund it – just in case the investment platform giant withdraws the offer.
The sign-up bonus is also open to existing Hargreaves Lansdown customers who do not have a cash Isa, but does not accept transfers.
Customers will receive the £25 sign-up bonus six months after the offer ends.
The bonus will be paid into the customer’s Active Savings Account, provided they deposit £10,000 into an Isa.
Savings tax trap
With interest rates rising so much over the past two years, many more savers are paying tax on the interest they earn on their savings as they use their Personal Savings Allowance (PSA) for smaller deposits.
When rates were low this didn’t matter so much as the PSA protected many from tax on their interest – even though the £1,000 allowance is halved for higher rate taxpayers and eradicated for higher rate taxpayers.
That’s why saving in an Isa is crucial for savers who want to protect as much of their hard-earned money as possible from the tax authorities.
The best easy access account on the market currently pays 5.08 percent and is offered by Charter Savings Bank.
Someone putting $20,000 into this easy-to-access account would earn $1,040 in interest within a year.
So even a basic rate taxpayer would exceed their annual tax-free savings of £1,000 with a deposit of £20,000, while a higher rate taxpayer (someone earning £50,271 to £125,140 a year) would easily exceed their lower allowance of £500 exceed.
On £1,040 of annual interest, a higher-rate taxpayer gets the first £500 tax-free, but is taxed at 40 per cent on the remaining £540, meaning they end up with £824 after tax.
Even a basic rate taxpayer would end up paying £16 in tax on their savings with this account, leaving them with £1,024.
With an Isa, the interest is tax-free, regardless of the amount.
As a savings platform, Active Savings offers access to multiple savings products and banks. It allows savers to manage all their savings through one online app-based account.
When you place money into an Isa or other savings account on the platform, it is held by that bank or building society.
All Active Savings partner banks are authorized by the Prudential Regulation Authority (PRA) and covered by the Financial Services Compensation Scheme.
Deposits are protected up to £85,000 per banking license in the event that the bank or building society goes bust. Deposits over £85,000 with the same provider are unlikely to be covered.
Mark Hicks, head of Active Savings at Hargreaves Lansdown, said: ‘This cashback offer is ideal for those rushing at the last minute to make the most of their Isa allowance this year and for the early birds in the next tax year who have already completed their benefits.’
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