NatWest launches TWO new best buy cash Isa deals and closes the gap on the best fixed rate taxable accounts

NatWest Launches TWO New Best Buy Cash Isa Deals and Closes the Gap on Best Taxable Fixed Rate Accounts

  • NatWest one-year cash Isa pays 5.7% and its best two-year fixed Isa pays 5.9%
  • The difference between the best biennial taxable account and Isa is now only 0.3%

NatWest has become the latest major bank to launch two leading Isa cash deals.

Isa, the one-year fixed rate, offers a tax-free interest rate of 5.7 percent, while the two-year fix pays 5.9 percent.

Last month, Lloyds Bank made headlines when it also launched two market-leading Isa cash deals – then it was 4.95 percent and 5 percent for one year and two years respectively.

Someone who puts £10,000 into NatWest’s one-year deal earns £570 in tax-free interest over 12 months. Those who opt for Isa, which is valid for two years, will earn £1,180 over the two-year period.

Top dog: NatWest one-year and two-year fixed rate cash Isa deals are both market leading.

What makes NatWest’s offering even more enticing is that it effectively closes the gap to the best fixed rate taxable savings accounts.

The best one-year and two-year fix, currently offered by Vanquis Bank, pays 6.15 percent and 6.2 percent, respectively.

That equates to a difference of 0.3 percentage points between the best two-year cash Isa and the two-year taxable account. At the beginning of this month, the difference was 0.74 percentage point.

– Check out the best fixed rate savings deals here.

At the moment, anyone who saves outside an ISA may be faced with a tax assessment on their savings.

Basic rate taxpayers can earn up to £1,000 in interest tax-free each year.

Higher rate taxpayers can earn up to £500, while higher rate taxpayers (those earning more than £125,140) receive no taxpayer protection at all.

A base rate taxpayer with money in the one year Vanquis fix needs £16,262 in savings to tip the amount of interest they can earn before tax is due.

The best accounts at a glance

Easy access: chip* – 4.51%

One-year fixed rate: Vanquis Bank – 6.15%

Two-year fixed rate: Vanquis Bank– 6.2%

Easily accessible cash Isa: Leeds BS – 4.2%

One Year Cash Isa: NatWest – 5.7%

Two-year money Isa: NatWest – 5.9%

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A higher rate taxpayer would need £8,131 in the account to pay tax.

However, if that personal allowance has been used up, the real return (after tax) on the 6.15 percent deal drops to 4.92 percent for base rate taxpayers and to 3.69 percent for higher rate taxpayers.

Savers can put up to £20,000 in an ISA every year.

If they haven’t already and are considering a savings product, the NatWest Isa deals can make a lot more sense than the higher paying taxable fixed rate accounts.

Plus, unlike the taxable flat rate deals that don’t allow withdrawals, Isa flat rate cash offers a little more flexibility.

For example, NatWest allows savers to close their account early and withdraw their money subject to the loss of 90 days of interest.

Anyone considering moving their existing Isa to NatWest can do so too.

It accepts transfers from cash Isas, stocks and shares Isas, Lifetime Isas, and Help to Buy Isas.

On its website, it warns that the deal may not last long. It says, “Available August 9, 2023 until 5:00 PM for new customers and August 14, 2023 for existing customers.

“Please note that these issues may be withdrawn early due to limited availability.”