Which ISA is the right one for you?

The new 2024-25 tax year is under way and for savers it’s a time to consider where to put their hardearned cash.

ISAs are a tax-efficient way to save. If you’re considering which option to choose, TSB’s head of savings, Peter Hatton, has some tips which may help:

■ Instant access deals: Peter says that these are “great if your priority is flexibility and ready access to your savings”.

But they often have a variable interest rate “so you may get a lower return on your balance if rates fall”.

■ Fixed-rate Isas: “If you’re prepared to lock your money away, then a fixed-rate product is a good way to protect your savings when interest rates could drop, because the interest rate is guaranteed for the term of the product,” says Peter.

A compromise could be to spread savings across multiple accounts with different end dates.

■ Limited or defined access accounts: Peter says: “These can be ideal when you want a better return than you’d get from a pure instant access account, but with greater flexibility than a fixed-rate product.”

Make sure you understand the terms for making withdrawals and whether the accounts will give you enough flexibility and a decent enough rate.

■ Stocks and shares ISAs: Savers can use some or all of their £20,000 annual ISA allowance to invest in stocks and shares.

“This approach is normally only appropriate for individuals who are prepared to put their money away for longer timescales – typically at least five to 10 years,” says Peter. “And remember, the value of your investment can go down as well as up.

“Always make sure you do your research before investing and consider seeking financial advice.”

■ Saving for specific purposes: Lifetime ISAs can help people who are saving for their first home or their retirement. You can put in up to £4,000 each year, until you are 50. You must make your first payment into your ISA before you are 40. The Government will add a 25% bonus to your savings, up to £1,000 a year, until the age of 50.

Junior ISAs can also help kids get into the savings habit.

■ By VICKY SHAW