New figures show that interest rates on tax-free cash ISAs are at their highest level for two years –
giving UK savers a welcome boost in an otherwise tough financial climate.
The average rate of return on a cash ISA is 2.27 per cent – the highest average interest rate on the
product since January 2009 – according to research from Moneyfacts.
ISA accounts have annual investment limits tied to each tax year, which ends on the 5th of April.
Around January and February, many banks set their ISA product rates to more attractive levels to
encourage savers to invest before the tax year end.
The cash ISA investment limit is £5,100 for the tax year ending on 5th of April 2011 – and up to
£10,200 if you also choose to invest in ‘stocks and shares’ ISA products.
However those limits are set to increase in the coming tax year – you will be able to invest up to
£10,680 in total, and £5,340 in a cash ISA, in the tax year from 6th April 2011.
The main advantage of ISA investment for basic rate taxpayers is that the interest is paid tax-free.
This means that to get the same return as the current top-paying cash ISA – Nationwide’s e-ISA at
2.90 per cent gross – you would have to find an equivalent savings account paying 3.63 per cent
before tax.
