Cash ISA

He was asked if now is a good time to open an ISA or not

Martin Lewis has offered some advice on how you could organise your savings. He explained the practical tip amid the current uncertainty surrounding the economic impact of the Iran conflict.

The major war has already triggered a surge in oil prices, with fears of long-term consequences for food production and global economic growth.

Mr Lewis was questioned on his BBC podcast about whether now is an opportune moment to open a stocks and shares ISA, given that markets are struggling. When share prices fall, it can present a prime opportunity to invest, as your funds could increase in value when the market bounces back. But if prices decline further, the worth of your holdings could also drop. In response, Mr Lewis outlined the general principle to bear in mind.

He said: “If you’re talking about investing for a long term money that you don’t need for five years and you’re going to do that in a nice spread of investments, like a global tracker fund or an S&P tracker or FTSE tracker, then you just have to accept that you will never know when the perfect time to put money in is.”

£1,000 savings tactic

Nevertheless, he did reveal one strategy you could use to reduce the risk posed by market volatility. Mr Lewis said: “Let’s just imagine you’re putting £10,000 in a stocks and shares ISA, and you’re putting it away for a long time.

“You could put £10,000 in now but you could arrange with the provider that it sits in its cash part. You can hold it in cash, within a stocks and shares ISA, for the moment.

“You could say I’ve got £10,000, over the next 10 months, I’d like you to buy £1,000 a month of that tracker fund that I’m putting my investment into. It’s called pound-cost averaging.

“Because you’re drip feeding the money in, that helps smooth out the short-term volatility of buying at the right moment. So if you’re worried about that volatility, you might want to adopt that tactic.”

Mr Lewis continued in saying that in reality nobody can predict the optimal time to invest. He said: “They are unknowable in the short term, but in a broad spread of investment over the long term, on the balance of probabilities, investing will outperform saving.

“So don’t let the volatility put you off, but you might want to spread the time that you’re putting the money in.”

Major changes to ISA allowances

Savers may also want to note that major changes to ISA allowances are on the horizon. Currently, you can deposit up to £20,000 each tax year, which can be divided as you wish between cash ISAs and stocks and shares ISAs.

From April 2027, you will only be permitted to save up to £12,000 as you choose. The remaining £8,000 will only be available for deposits into investment-based accounts.

Savers aged 65 and over will be exempt from the new regulations, retaining the existing £20,000 allowance. ISAs are entirely tax-free, with no tax liability on any interest earnings or investment gains within these accounts.

BBC Morning Live expert Laura Pomfret has highlighted the top six easy access ISA accounts as savers face the ‘last chance’ to use the full tax-free allowance

A BBC finance expert has outlined which ISA accounts people should be considering as a ‘fresh start’ gets underway. With the new financial year having kicked off on 6 April, savers have the opportunity to make use of cash ISA accounts for up to £20,000 of tax-free savings — and crucially, it’s the final year before this allowance is reduced.

Appearing on BBC Morning Live, finance expert Laura Pomfret explained what people should be doing and highlighted which accounts are currently offering the most competitive interest rates.

She said: “It is a fresh start and there’s an opportunity to make the most of your money and we’re going to start with cash is because the ISA limit resets every year and we’ve got £20,000 per person that we can utilize within cash ISA, stocks and shares is lifetime is a little bit different, but it’s a way of growing your savings tax-free because you know saving is a really good thing and you do make interest on it but if it’s outside of an ISA you will have to pay tax on that interest.”

Those with savings held outside of ISAs remain liable for tax. Ms Pomfret further explained: “Most people get a personal savings allowance per year so if you’re a basic rate taxpayer you can earn £1,000 outside of an ISA tax free it drops to £500 when you are a higher rate taxpayer but basically this is why we should use our ISA allowance first because you can put £20,000 in and not have to worry about any interest that you make you don’t have to pay tax on it.”

Those with ISAs are set to face a significant change from 7th April 2027. She explained: “This is the last tax year before the allowance for a cash ISA drops to £12,000. So this is the last year that you get £20,000 that you can put into a cash ISA, and then going forward from 6th of April next year, 2027, it drops to £12,000, apart from if you’re 65 or over, you can save into a cash ISA, and you get the other allowance. So it’s important to maximise that this year while you can.”

Host Helen Skelton asked: “If you are in a position that you can save money, where should you put it right now?”

According to the BBC expert, there are six accounts worth considering for ‘easy access’ savings. She stated: “Easy access is where you can get it in and out usually without penalty, but you can have a look at the terms and conditions and these are some of the best. So, first up, we’ve got Trading 212 with a 4.6% interest rate.”

“It drops after the first year. Now, to be clear, that is an investment platform as well, but they do have a cash ISA that you can use, and they’ve got a 4.6%. You’ve then got, for example, Virgin Money with a 4.15%. You are limited to two withdrawals per year on that. So, it’s classed as an easy access, but there are some limits to withdrawals.

“So, Bank of Ireland UK 4.06%. The rate drops after a year with that one. It’s like a you know in a new rate, and then interest is paid annually. Leeds Building Society of 4.05%. You have to pay in a minimum of £1,000 to get that one. Um, Yorkshire Building Society, 4.05%, withdraw as often as you want. And then Tesco Bank, for example, 4.02%, the rate drops after a year. With that one, you can do it over the phone. The rest are all online or using the app. But these are just examples. These rates change quickly.”

Top ISA easy access accounts highlighted

• Trading 212 4.6%
• Virgin Money 4.15%
• Bank of Ireland UK 4.06%
• Leeds Building Society 4.05%
• Yorkshire Building Society 4.05%
• Tesco Bank 4.02%

She explained that, generally, individuals should check comparison websites for terms and conditions, with at least 4% interest being the crucial figure.

She continued: “You may get higher if you go for a fixed, but this is where your money can be fixed and locked away for one, two, three years. So this is about choosing what’s right for you.

“If you can afford to put some away and not need access to it, you might beat that rate with a fixed one. And obviously, as I said earlier, there’s also stocks and shares is you could look at a lifetime is if you fit the criteria, but ultimately getting it in tax wrapper is a great thing to do so that you can you know grow your interest tax-free.”

Martin Lewis has explained the personal savings allowance and when basic rate taxpayers with over £22,000 in savings could pay tax on interest earned

Martin Lewis has issued a tax alert for savers, with a particular warning for those holding more than £11,000 or £22,000 in savings, depending on their tax bracket. On his ITV programme this week, Mr Lewis provided savers with guidance on structuring their savings to prevent unnecessary tax charges on interest.

He began by explaining the personal allowance, which permits anyone to earn £12,570 before any tax is levied. This threshold has remained frozen since 2021, and last November Chancellor Rachel Reeves controversially extended this freeze until 2031.

The freeze has faced criticism for creating ‘fiscal drag’, meaning more of the lowest earners in the country now pay tax as inflation and wage rises leave them with less disposable income whilst facing higher taxation.

On this he said: “The first one, the personal allowance, £12,570 a year that you can earn from any source, earnings, rent, savings, interest without paying tax on. Most people get that unless you start earning over £100,000 when it’s taken away.”

Starting Rate for Savings Tax.

Mr Lewis said: “The next one not that many people know about is called the starting rate for savings. This is another £5,000 of savings. savings interest you can earn a year on top of the personal allowance. And this is designed for people who have low work earnings but high interest on savings. Often people who are retired. And here’s how it works.

“For every pound of earnings you earn above this allowance, you lose a pound on your starting savings rate. So imagine you earn £13,570. You’re a £1,000 above that. You can now only have £4,000 of tax-free interest in your savings due to the starting savings rate. And by the time you earn from work £17,570, this is gone. So it’s only for people on low work earnings and high interest on savings.”

He previously outlined that those in the ‘perfect circumstance’ would receive £12,570 from earned income. Mr Lewis explained the individual would then gain £5,000 through the starting savings allowance, plus £1,000 from the personal savings allowance on top ‘because they all go on top of each other’.

He added: “You could earn £18,570 a year tax-free with £12,570 of it coming from work or other sources, and another £6,000 of it coming from savings. I hope that makes sense. The main two for most people are the personal allowance and the personal savings allowance, but for those on lower incomes, it’s worth reading the starting savings allowance guide that’s our money saving expert just so you really understand it.”

Personal savings allowance

Mr Lewis described this as the ‘big one’ and said: “Next, we get the big one that many of you will know about, the personal savings allowance. And this is on top of those two. This is the fact that a basic rate taxpayer, 20% taxpayer, can earn £1,000 a year of interest in any form of savings at all without paying tax on it. Now, the top savings accounts at the moment pay about 4.5 per cent. So, you need about 22,000, just a little over £22,000 in the top savings account before you earned £1,000 interest.

“So, if you got less than that, you’re not going to be paying tax on your savings interest because it’s tax free. High rate tax because it’s within your personal savings allowance. High rate taxpayers pay £500 a year of interest they can make each year tax free. It’s about £11,000 saved at the top rate.

“If you’re an additional rate taxpayer earning over £125,000, you don’t get one of these. So, you got your personal allowance, your starting rate for savings, and on top of that up to another £1,000 in your personal savings allowance.”

For the 2025/26 tax year, the UK Personal Allowance stays at £12,570, with a 20% basic rate (up to £50,270), 40% higher rate (£50,271-£125,140), and 45% additional rate (over £125,140) applying to England, Wales, and Northern Ireland.

ISAs

Mr Lewis stated that this week’s show was focused on ISAs, explaining: “You can put up to £20,000 a tax year in, as you know. And crucially, the interest earned in a cash ISA does not count towards the personal allowance, does not count towards the starting rate of savings does not count towards the personal savings allowance. It is totally separate from that. So, anything you earn in there is not taxable. I should note premium bonds work roughly the same way, but it’s not an annual allowance. It’s a maximum £50,000 you can put in in total. Those are the main ways that you can save without paying tax on them.”