Sylvia Morris The Savings Guru Four million of us pay tax on our nest eggs — and there’s absolutely no need!

Must-read column to boost your nest egg

SCARY figures ended up on my desk last week. More than four million saver accounts are at risk of having to pay tax on their interest — up by nearly a million in six months.

The reason? Higher interest rates and the fact that the humble, tax-free cash Isa has been snubbed for years.

But the Isa is back with a bang as the first port of call for savers. I would urge all to consider one, even those with small nest eggs.

A flurry of new cash Isas has been announced as interest in them hots up. The savings app Chip will offer one for the first time — an easy-access version paying 4.75 pc.

Coventry Building Society last week came out with its option, at an even higher 5.05 pc if you open it online and limit withdrawals to four a year.

Others are likely to follow, and I will keep you updated on the best ones. Cash Isas are basically the same as ordinary accounts, but the interest is tax-free.

Research from Shawbrook Bank says there are a lot of savers out there who don’t understand the workings of cash Isas, which were launched nearly 25 years ago.

But that’s hardly surprising — once the darling of the savings world, they fell into a backwater eight years ago when the personal savings allowance came into play. Few people who have started saving since then have had to think about busting their limit.

The allowance permits basicrate taxpayers to earn up to £1,000 in interest tax-free, while higher-rate taxpayers can earn up to £500.

As savings rates are much more generous now, a basic- rate taxpayer would only need £20,000 in an account paying 5 pc to hit their allowance. Higher- rate taxpayers, on the other hand, would reach theirs with £10,000.

When the allowance was introduced, rates were so low that the amount of savings you would need to be hit with a tax bill on your interest was off the charts — close to a six-figure sum for basicrate taxpayers.

Savvy savers struggled to see the point of cash Isas as they could earn more in an ordinary account and pay no tax.

Providers also gave up on them as demand dropped off; they faced higher administration costs to run these accounts.

That’s fair enough. There was a gap of 40 pc between the top oneyear fixed-rate bond at 1.35 pc and the Isa equivalent at 0.96 pc two years ago — before rates in general started to steam ahead.

Now that savers are turning to cash Isas again, that difference has shrunk to less than 4 pc: the best cash Isa rate is 4.98 pc from Shawbrook, and Investec’s oneyear fixed-rate bond offers 5.15 pc.

On easy-access accounts, the gap is down from 16 pc to almost zero. The top taxable account is 5.1 pc from Close Brothers (although you need £ 10,000 to open it) against 5.08 pc from Zopa’s Isa, with a £1 start.

Some providers are even paying a better or matched rate on Isas and ordinary accounts. Scottish Building Society pays 4.75 pc on both its one-year fixed-rate bond and fixed-rate cash Isa.

Rates are so generous now that it doesn’t take much to bust your personal savings allowance. The advantage of putting money into an Isa is that you won’t have to pay tax on the interest in the future if you find yourself caught in the tax net.

You can put in up to £20,000 into a cash Isa every tax year — and you still have until April 5 to use this year’s allowance.