With the introduction of the Personal Savings Allowance (PSA 2016) some of you reading this might be asking yourselves, why should I have an ISA or Individual Savings Account?

An ISA is a savings account that’s permanently tax-free and available to anyone in Britain over the age of 16. You can save up to £20,000 in the current financial year and the next.

Banks compete for your business through switching bonuses and by offering different rates for different ISAs; for example, there are Easy Access ISAs and Fixed-Term ISAs among others that are available. ISAs can also be transferred from bank to bank when you are looking to secure a higher interest rate.

Here at Paragon Bank we specialise in Cash ISAs offering consistently competitive products, including Easy Access and Fixed Term Cash ISA products.

The Personal Savings Allowance means all savings are now automatically paid tax-free. Basic 20% rate taxpayers can earn up to £1,000 interest a year without needing to pay tax on it, higher 40% rate taxpayers £500 whereas the top 45% taxpayers always pay tax on savings. HMRC monitors the level of interest paid via reporting by banks at the end of every tax year.

So, the question, why set-up a Cash ISA when saving for most of us is tax free?

The answer is straightforward!

Your Cash ISA doesn’t count towards your Personal Savings Allowance, its tax free now and in the future, and you still have your PSA.

For top-rate taxpayers or those of you who are bigger savers who've used up the PSA, there are big tax rewards by saving in a Cash ISA.

The benefits of opening an ISA means taking advantage of both the tax-free status of an ISA and the £1,000 interest limit without the need to pay tax on your PSA.

It’s a win-win situation.

Those of you who already have an ISA, you’ll know that the end of the financial year is fast approaching, its deadline on the 5 April. This means now is the time to check behind the sofa, look under the mattress and open-up that biscuit tin to make sure every spare penny, up to £20,000, is working for you before the new ISA period launches on 6 April.

If you would like further information please visit our Cash ISAs page on the Paragon Bank website.