Savings Boom

The number of Cash ISAs on the market has grown by 114 in the past six months alone, according to data from MoneyFacts, and there has also been a rise in the number of savings accounts available.

Rates have become more attractive with lots of accounts now beating inflation. So now is definitely time to look around to ensure you have your money working hard for you.

Inflation is currently 2% (as measured by CPI) so there are now plenty of accounts which actually make you money because they pay more than the rate of inflation, and that's not always been the case.

Listner's to Money Matters on Times Radio have sent in a lot of questions via Instagram, and here are my responses:

Q: Nafisaingar asks: What is the best place to save money?

A: The best rates I can see are currently

Regular Savings Accounts

• The Leeds Building Society Home Deposit Saver Account pays you 5,15%. It lets you earn a competitive rate of interest whilst building up the deposit needed for your first or next home. Plus, it offers a £500 bonus to boost your savings if you receive a residential purchase mortgage offer from Leeds Building Society.

  
  

• The Principality Building Society 6 Month Regular Saving Account pays a stonking 8% on regular savings, although there are limits to what you can put in. You can pay in up to £200 each month, in one or more payments. You don' t have to pay money in every month

  
  

• The FirstDirect Regular savings Account pays 7.00% fixed for 12 months. You can

  
  

  save between £25 and £300 a month, up to £3,600 per year

  
  
  
  

Fixed Rates

• GB Bank has a one-year fixed rate saving product that pays 5.2%

  
  

• Shawbrook Bank has a five-ear fixed rate products that pays 4,57%

  
  

Variable Rates

• GB Bank offer a variable savings account paying 4.91%

• WealthifyInstant Access Savings (powered by ClearBank) variable account pays 4.91%

• Aldermore offers a variable rate which pays 4.9%

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Ensure that any account you open is protected by the FSCS (Financial Services Compensation Scheme) guarantee. It protects customers including individuals, companies and small local authorities for up to £85,000.

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Q Rachelstockhausen & Iveanopiniononthat asks how much annual interest can you earn before you are taxed?

TAX ON SAVINGS

• Basic Rate taxpayers can earn £1,000 a year in interest without paying any tax.

  
  

  Any amount over £1,000 is taxed at 20%.

  
  
  
  

  If you have £25,000 and earn 4% you would be reaching your tax-free savings threshold.

• Higher Rate taxpayers can only earn £500 in interest each year before being taxed. After reaching that limit, they are charged at 40%.

  
  
  
  

  If you have £12,500 and earn 4% you would be reaching your tax-free savings threshold.

• Additional Rate taxpayers have no savings allowance, so all interest earned is liable to tax at 45%.

There is a 60% tax trap in which people earning above £100,000 start losing part of their tax free allowance which raises their effective tax rate.

Millions of people will pay tax on their savings interest this year as rates remain high but tax thresholds stay frozen. This makes Cash ISAs more attractive.

CASH ISAs

• Plum's cash ISA pays 5.17%

• Kent Reliance Easy Access pays 4.86%

• Kent Reliance 1 year fixed rate ISA pays 4.94%

Q: Bellamorgi asks is it worth me maxing out my LISA even if I live in London and will never be able to afford to buy a home and can't join forces with my girlfriend because she's stuck in her flat because of Help To Buy restrictions?

A Lifetime ISA (LISA) lets you save up to £4,000 every tax year towards a first home or your retirement, with the state adding a 25% bonus on top of what you save. That means you can get up to a maximum of £1,000 of free money every year. In addition to that, your savings are earning tax-free interest.

If you are never going to buy a home, or if the home is going to cost over £450,000 - then the only point in having a LISA is to save it for use until you are 60 or older - which is a long time to wait.

There are hefty penalties for withdrawing the money early - so don't invest unless you think you are sure of using the money as the system allows.

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