What savers need to do now before a Labour budget hits their savings: SYLVIA MORRIS
Take cover. Our savings are likely to be in the firing line for the next five years as the new Labour government turns its guns to finding more money.
We will probably have to wait until the first budget, likely to be presented in September, to find out whether the crucial austerity limits will be met.
Easy options include the amount you can earn in interest before paying tax, known as the personal savings allowance, and the maximum limit of £20,000 you can put into cash ISAs.
Until then, it is unclear whether either is in the Chancellor’s sights. But in light of the uncertainty, cash ISAs should be the first choice for any saver.
Money grab: We will probably have to wait until the first budget – likely to take place in September – to know whether crucial austerity measures will be achieved
This is because you no longer have to pay tax on the interest once your money is in your savings account.
The days when easy-to-access ISAs yielded much less than comparable regular savings accounts are over.
According to rate checkers MoneyfactsCompare, the average rate on Isa’s is 3.33 per cent, compared to 3.11 per cent on taxable accounts.
Currently, you can save up to £20,000 a year in savings accounts. These work in the same way as regular savings accounts.
At a maximum rate of 5 per cent, that’s up to £1,000 of tax-free interest if you max out your Isa this year. £200 will remain out of reach of the taxman if you pay basic rate tax on your interest, and £400 for higher rate payers.
> View the best cash Isa rates in our independent savings tables
Where do you start?
Move as much as possible from your regular easy access account into a cash Isa. It may not be beneficial to you now, but it will be in the years to come.
If you are one of the millions of savers who have their easily accessible money at their own bank, don’t just transfer it to their savings account. They pay a paltry interest rate of just 1.2 percent, while others pay four times as much.
Choose a flexible type of Isa with easy access. This will prevent you from being penalised when you need your money.
The flexible accounts allow you to withdraw and replace money without affecting your £20,000 annual Isa allowance, as long as you replace it in the same tax year. The best rate comes from the app-based Chip Cash Isa at 5.1 per cent
If you prefer an online account, Ford Money is a good choice at 4.6 per cent on £1. A big advantage is that the bank pays the same interest to all savers on the account.
NS&I requests not to cash in bonds
When I checked my NS&I price checker app to see if I had won any prizes in this month’s draw, a new call appeared.
NS&I told me in bold capital letters: ‘YOUR BONDS WILL NOT BE FORGOTTEN.’ And further: ‘Do not be tempted to cash in your bonds if you think they will not bring you new fortune.
‘If you do this you will miss a prize draw, which means you will have less chance of winning a prize.’
Is NS&I concerned that bondholders could cash in their bonds at a time when the bank has been ordered by HM Treasury to raise £9bn (plus or minus £4bn on either side) in the financial year that began 1 April?
According to figures published so far, it saw just £58m flow into the Treasury in the first two months, compared with £2.4bn in the same period last year.
But I’m not going to sell my Premium Bonds. With tax revenues rising for savers, the fact that I don’t pay tax on prizes is their big attraction.
Sy.morris@dailymail.co.uk