The desire of thousands of Brits to avoid tax on savings accounts led to a significant increase in the amount of money invested in tax-free accounts in April 2011. New figures from the Building Societies’ Association (BSA) show that the amount of savings invested in cash Individual Savings Accounts (ISAs) in April 2011 was more than double the level of the previous April.
If you’re looking for a good home for your savings, ISAs can often be the best savings accounts purely because the interest rate they offer is boosted by the fact you don’t have to pay your usual rate of tax on the interest you earn.
Tax free savings in building societies exceeds £1 billion in April 2011
Cash ISAs are accounts which are available to every adult and allow you to invest up to a certain amount each tax year without paying any tax on your interest. In the 2011/12 tax year you can invest up to £5,340 in a cash ISA. With the tax on savings accounts generally charged at 20 per cent, investing in an ISA can help you maximise your income as no tax will be deducted.
The BSA figures showed that Brits invested £1.37 billion in cash ISAs in April 2011, compared to £668 million in April 2010.
In addition, the figures for all savings accounts (after deducting withdrawals) showed that building societies had net receipts of £983 million in April 2011 compared to just £537 million in April 2010.
David Cutter, chief executive officer of Skipton, one of Britain’s biggest building societies, said: “Mutuals had a significant inflow of funds into savings accounts during April which was helped by particularly strong deposits into ISA accounts compared to April last year.”
Shop around to get the right savings account for you
Many Brits are finding it hard to save in the current financial climate, which makes finding the best savings accounts even more important.
David Cutter, from Skipton Building Society, continued: “It will be difficult for deposit takers to maintain a positive inflow of funds this year given the squeeze on household finances.”
So, if you’re looking to add to your savings, it’s vital that you find the right type of account. With so many different types of savings accounts on the market it’s crucial you pick the right one in order to maximise your return.
If you plan to save less than £5,340 between now and next April, and you’re a taxpayer, ISAs are often the best savings accounts for you. You can maximise your return simply because ISAs pay interest with no tax deducted.
Bear in mind that there are different types of ISA savings accounts. While many are instant access, allowing you to withdraw funds as and when you need them, others offer fixed rates and require you to commit your savings for a specified period.
If you have maximised your ISA allowance then there are different types of savings accounts you can consider. If you want to save on a monthly basis, ‘regular savers’ are a popular way of maximising your return. These accounts normally run for a twelve month period and will often pay a bonus rate of interest if you contribute a certain sum to the account every month for a year.
If you have a lump sum that you want to invest, savings bonds can be the best savings accounts for you. These products require you to commit your savings (typically for a period of 1-5 years) and generally pay a fixed rate of interest. Bear in mind though that you will often be penalised if you withdraw your savings before the maturity date of the bond.
