HOW BOOST TO YOUR SAVINGS BY 25pc

This could be a key year for your savings. While an interest rate rise looks unlikely for a few months yet, there are looming tax changes which could boost your returns by 25 pc or more.

Under the current rules, most of us have 20 pc tax taken from our interest by the bank or building society.

From April 6, basic-rate taxpayers will be able to receive £1,000 of interest a year tax-free. On an account paying 1 pc you would be paid £10 a year on every £1,000 instead of £8 — that’s a quarter more interest.

higher-rate taxpayers will be able to earn £500 interest tax-free.

This makes it more important than ever to find the best home for your money because, quite simply, you will have more to lose.

start by reminding yourself where your money is and what it is earning. Make a note of each account name and also its version or issue number.

The rates paid on old accounts should be on banks’ internet sites. They’re not always easy to find though.

if you can’t find it or don’t have internet access, then phone or pop in to your local branch ( if you’re lucky enough to still have one).

if you are looking to build up a nest egg, consider regular saving accounts. The best pay 6 pc before tax.

if you open one now you won’t get your interest until next January. Unless you have stacks of money elsewhere, the interest should all be tax-free.

There’s been some bad publicity around these accounts, but the fact is they pay far more than you can earn elsewhere by putting money away monthly.

if you saved the maximum £300 a month that some allow at 6 pc, then after a year you would be paid £115.96 interest. if you saved the same amount into a normal high street account paying 1 pc you’d earn just £19.47.

Check the terms carefully. While some — such as TSB — are very flexible, allowing you to miss months and make withdrawals, others — such as First Direct and HSBC — will slash the interest if you stop saving or withdraw money.

Top rates are available to customers of First Direct, HSBC, M&s Bank, TSB and Lloyds. Those with accounts open to all include Leeds Building society at a lower 3.05 pc, while halifax offers 6 pc to children on a maximum £100 per month.

A sneakier way to earn a top rate is to choose an interest-paying current account.

You’ll usually earn interest only on the first few thousand pounds — anything above the limit will generally earn nothing.

Typically, you will have to pay a minimum amount in each month and may also have to pay direct debits out of the account. There may even be a monthly fee, in which case you must do the sums to make sure you will be on the winning side.

santander 123 stands out, paying 3 pc interest on up to £20,000. so that would be £600 interest on the maximum deposit — though you will lose tax on the money until the changes in April.

You need to pay in at least £500 a month, keep a minimum balance of at least £1,000 and have two active direct debits. And there’s a £5 monthly fee, meaning £60 a year would go in fees. As a rule of thumb you’d need more than £5,000 in the account to be better off than with the best savings accounts in purely interest terms — though it does give cashback on certain household bills.

TSB’s classic Plus is another winner, paying 5 pc interest on up to £2,000, plus 5 pc cashback on the first £100 of contactless payments each month. in all, you could make £160 a year at most. You must pay in at least £500 per month.

Nationwide’s FlexDirect pays 5 pc on the first £2,500 for 12 months, worth a maximum £125. You need to pay in £1,000 per month but, as with TSB, there is no need to set up a direct debit.

Other banks which pay more on current accounts than savings include Lloyds, Bank of scotland, Tesco Bank and clydesdale Bank.

Fixed rates are a reasonable option if you can tie up your money. Deals can come and go quickly so if you see a top one, snap it up.

expect to earn just over 2 pc for one year, about 2.3 pc for two years and at least 2.5 pc for three years.

Finally, don’t forget tax-free cash isas. The overall maximum contribution for both cash and investment isas combined is £15,000 per tax year.

Money in isas is usually accessible and you can move it between different isa providers.

Although the rates on many isas seem lower than high street taxable accounts, interest rates will rise again, so you should still aim to put as much as you can into these accounts. Then the tax breaks you’ve built up will really be worthwhile. The best pay a little over 1.5 pc.

Young people looking at buying a home could opt for one of the help to Buy isas. These offer a huge 25 pc tax-free bonus so long as the money saved is used as a house deposit. But choose with care because while the best pay 4 pc interest the worst offer a stingy 0.7 pc.

That leaves easy-access isas on the internet and the high street, where top rates are around 1.5 pc.

here the usual rules apply. Watch the interest rate like a hawk and if an account includes a bonus, put a note in your diary to move the money the day it drops off.