Could an ISA boost your savings?

It hasn’t been easy to grow your money in recent years – but is that changing? At the start of 2024, Bank of England base rate is at its highest level for 15 years and the cost of living crisis is beginning to ease. It all means there are some promising opportunities to boost your financial future.

It’s something that, at Skipton Building Society, we’re speaking to a lot of customers about right now. Everyone’s situation is different. But there’s one area we like to highlight to everyone – when it comes to saving and investing for the future, paying less tax could help you achieve your goals.

That’s why your annual ISA allowance remains really important. And at time of higher interest rates, ISAs look more attractive – and more relevant – than they have for some time.

How an ISA can help you save

With ISAs, you can save up to £20,000, tax-free, in each of the 2023/24 and 2024/25 tax years.

  • ISA stands for Individual Savings Account.
  • Different types of ISAs are available (subject to eligibility).
  • You can’t pay in more than your £20,000 annual ISA allowance overall.

Although the annual ISA allowance has stayed at £20,000 since 2017, the government is changing some of the rules from April 2024. This includes letting you pay into more than one of each type of ISA – giving you greater flexibility to save tax-free.

Using your ISA allowance across different ISAs

You can save up to £20K annually across a range of ISAs.

As an example, if you paid your £4,000 annual allowance into your Lifetime ISA (LISA), £10,000 into a Cash ISA and £6,000 into a Stocks and Shares ISA, that would make up your full ISA allowance.

The impact of the Personal Savings Allowance on ISAs

If you haven’t considered ISAs much in recent years, that’s easy to understand.

Since 2009, we’ve been living in an era of historic low interest rates. In 2016, the government also introduced the Personal Savings Allowance (PSA).The first £1,000 interest you earn each year (£500 if you’re a higher rate taxpayer) is tax-free. Additional rate tax payers do not receive a PSA. 

These factors caused less reliance on an ISA to save tax-free, unless you had large amounts of savings.

Higher interest rates have made ISAs more relevant

There are now improved rates for your savings, which is positive. However, it does mean the PSA may no longer be enough, on its own, to protect your savings returns from tax.

  • When rates are lower, there’s a good chance the interest you earn could sit within your PSA.
  • For example, if you had savings of £50,000 and you earned 1%, you’d earn £500 gross interest.
  • This is under your PSA allowance if you’re a basic rate taxpayer, meaning no tax to pay.
  • But say that rate moved up to 3.8% and you were earning £1,900 interest – you’d now be over your PSA.

When it comes to your financial future, every penny counts. We believe ISAs could be a good way to make more of your money – and keep more of what you earn.

Cash ISA rates are now more rewarding

In the middle of 2023, the Bank of England nudged interest rates to their highest level since October 2008. And with it, the rates available on Cash ISAs are at their highest levels in over a decade.

How a 1 Year Variable Rate Cash ISA rate has increased

How a 1 Year Variable Rate Cash ISA rate has increased

Source: Building Societies Association, variable ISA with Bonus

The recent rise in rates means you have an opportunity to earn more interest on your savings, tax-free. And that could help you feel more prepared, and confident, about your financial future.

Saving and Investment Guide

Saving and Investment Guide

Learn more about the different types of savings accounts available (including ISAs), the PSA and options for you to both save and invest.

Download your free guide

How can you find the best ISA for you?

ISAs have changed a lot since they were first launched in 1999. At Skipton Building Society, we’ve moved with the times to expand what we offer. Today, we have a wide range of ISA options to suit different needs.

To get started, it’s worth thinking about what you want your money to achieve. Let’s say you’re saving for a summer holiday or keeping money stored for any just-in-case moments.

  • For these types of needs, an Easy Access Cash ISA might be right for you - you can withdraw money and pay in when you like, whilst keeping the tax-free benefits.
  • Our Fixed Rate Cash ISAs typically offer higher rates of interest. You can’t access your funds during the fixed term, but you can close your account early with an interest penalty.

Could you commit your savings for longer to achieve bigger goals?

We also offer the Cash Lifetime ISA (LISA) and advice on Stocks & Shares ISAs.

A LISA is available if you’re aged 18-39. They’re either to save for your first home or retirement.

  • You can pay in up to £4,000 tax-free each year.
  • The government pays a 25% bonus on top (up to a maximum of £1,000 a year).
  • There are strict rules on making withdrawals. If you withdraw before the age of 60, unless it's to buy your first home, a 25% government charge applies. This means you would get back less than you paid in.

Stocks & Shares ISAs see your money invested, with the aim of achieving higher returns than you would in a typical savings account. You must be 18+ and this does mean placing your money at risk. It’s only suitable for long-term goals of five or more years away.

How can Skipton Building Society help you make stronger plans?

This is the most exciting time I’ve known for offering ISAs.

  • There are more types of ISAs than before. Meaning there’s options to suit different needs.
  • Interest rates are much more rewarding for savers once again.

We’re keen to help our members make stronger plans, especially when there’s a good opportunity to make the most of higher interest rates.

It’s why our ISA specialists are here to help you make informed decisions with the aim of growing your savings in a tax-efficient way. You can visit your local branch or call us to get started.

Ready to choose yourself? Why not browse our range of ISAs options.

Important information

Your money is at risk with investing in a Stocks and Shares ISA. The tax treatment of savings and investments depends on personal circumstances. Tax rules may change in the future.

AER stands for Annual Equivalent Rate and shows what the interest rate would be if interest was paid and added each year. All ISA interest is paid tax-free, which means it’s exempt from income tax. We pay all non ISA savings interest gross, which means no tax is deducted. It’s your responsibility to pay any tax due, based on your individual circumstances.