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Are ISAs still worth your time in 2019?


There is only a short amount of time left for savers to make the most of their cash ISA allowance for the tax year which ends on 5 April, but some savers may be choosing to stick to non-ISA accounts.

Tax free Status

An ISA is a tax-free way to save or invest, any money that is held within an ISA keeps its tax-free status now and in the future. In the 2018/19 tax year, up to £20,000 can be put into an ISA. The allowance will remain the same for the 2019/20 tax year. There is £277bn held in Cash ISAs in the UK as of January 2019, this is a combination of recent subscriptions and tax-free allowances built up over time by customers who have added to their ISA each tax year.

The Personal Savings Allowance (PSA) differs dependent on your income. Currently basic rate taxpayers (20%) are allowed to earn up to £1,000 of interest a year and incur no tax, high rate taxpayers (40%) can earn up to £500. There is no guarantee of how long the Personal Savings Allowance will continue and this could be reduced or removed in the future.

If interest rates rise, the proportion of any income which is covered by the PSA will reduce as the same balance will earn more interest - using the allowance more quickly. An ISA protects you from incurring any tax on your savings should this happen.

Tax free ISA Wrapper

Previous rules meant there was a limit to how much you could put into two different ISA products. You could either choose to put all of your ISA allowance into one ISA or split your allowance between two different ISA products.

These rules have now been relaxed. Although the amount you can save each tax year is still a maximum of £20,000, this amount can be split across multiple ISA products such as stocks & shares ISAs, cash ISAs and Innovative Finance ISAs.

If you’re hoping to build your savings, expect interest rates to rise or your income to increase over time, each of these could mean your savings income becomes taxable, that’s unless it’s in an ISA.

For more information please visit our ISAs Explained Guide or take a look at our range of ISA products.

Paragon Bank PLC is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England number 05390593. Registered office 51 Homer Road, Solihull, West Midlands B91 3QJ. Paragon Bank PLC is registered on the Financial Services Register under the firm reference number 604551