...and don’t forget your new Isa allowance

WITH the new tax year comes a new £20,000 tax-free Isa allowance.

For those keen to invest in cash savings accounts, it’s slim pickings as far as top rates are concerned. But there is still a wide disparity between the best and the worst deals.

At best, the big banks pay a miserly 0.05pc on easy access accounts — and 0.01 pc at worst.

Savings rates have plummeted since the Bank of England slashed the base rate to a record low of 0.1 pc in March last year.

Cash Isas also lost their sparkle after the introduction of the personal savings allowance, which lets you bank tax-free interest on ordinary accounts.

Basic-rate taxpayers can earn up to £1,000 interest a year tax-free. Higher rate payers get £500, while additional rate earners get nothing. This means even with the best ordinary easy-access account, paying 0.4 pc, basic rate earners can hold £250,000 without paying tax.

During the pandemic, savers have squirreled away £126billion in taxable easy-access accounts, a 16.2 pc rise over a year to £901billion. The amount paid into cash Isas increased by 0.58 pc to £295 billion.

The personal savings allowance could be whittled away in the future, while a rise in rates might land savers a tax bill. Yet, any interest earned in cash Isas doesn’t need to be declared on self-assessment tax forms or count towards your savings allowance.

So where are the best cash returns? This week, popular savings provider Marcus launched its first cash Isa. The easyaccess account pays a top rate of 0.4pc. But it is only available to its 500,000 existing savers who use its easy-access account or fixed-rate bond.

Other top rates include online accounts. Nationwide 1 year Triple Access and Paragon Triple Access both pay 0.4 pc, with up to three withdrawals a year.

Leeds BS also has an account available at 0.4pc, with only four withdrawals a year. Other deals include Charter Savings Bank at 0.4pc, along with Coventry BS and Ford Money at 0.3 pc with no withdrawal restrictions. Or try your local building society.

For example, Vernon and Tipton both pay 0.4 pc, while Vernon’s regular savings Isa pays 1.45 pc.

It may not be worth tying up your money for a year, with the best one-year rate just 0.45 pc from Paragon Bank, Charter Savings Bank and Yorkshire BS.

However, Skipton BS launched a new 15-month cash Isa paying 0.6 pc.

The top Junior cash Isa rate, where the maximum you can put in is £9,000 this tax year, is 2.5pc from Bath and Dudley building societies. Coventry, the second largest society, pays 2.25 pc.

Any money parents or relatives put into a cash Isa for youngsters can be taken out when they turn 18.

Meanwhile, the charge for cashing in your Lifetime Isa early returned to a punitive 25 pc yesterday from a temporary 20 pc.

So now, for example, if you take out £1,000 — £800 of your own savings plus the £200 bonus — you will end up with £750 after a £250 exit fee.