The best Cash ISA rates in a decade – 3 reasons why you should consider a Cash ISA this tax year

It’s that time again. Cash ISA providers are revving up their engines as they prepare to compete for your ISA allowance. But this year, the ISA landscape is more interesting.

A higher Bank of England base interest rate has boosted the average Cash ISA rate to the highest level in more than 10 years. Good news for savers looking to shield more interest from tax, but far from the only reason people should consider a Cash ISA this year.

Here’s why Cash ISAs could be more relevant now than ever.

This article isn’t personal advice. If you’re not sure if something is right for you, seek advice. Inflation reduces the spending power of cash.

More interest could mean more tax

Rising savings rates have been a silver lining in a year of economic turbulence. But savers who enjoyed those woozy heights could be falling into a trap.

Earning more interest in non-ISA accounts will push savers closer to breaching their personal savings allowance (PSA). This is the total amount of interest you can earn across your savings accounts, on top of any which falls into your personal allowance or starting rate for savings, without paying tax.

Currently, basic-rate taxpayers have a PSA of £1,000 each year, higher-rate taxpayers have £500, and additional-rate taxpayers have no allowance. The PSA for Scottish taxpayers is based on the rest of the UK tax bands.

Scottish income tax changes from April – what you need to know

Every penny of interest earned this year will have edged you closer to your PSA. If you’re close to exceeding that threshold, but want to continue earning interest, you might want to consider a Cash ISA.

If you’re not in danger of exceeding your PSA, you should still consider switching to a better deal. Active Savings had an average of 1.8 market-leading rates every day last year through our bank and building society partners. Active Savings can make sure your money’s working harder.

More people will pay more tax

Millions of taxpayers could be pulled into a higher tax band over the coming years. The government will be freezing income tax bands until 2028 and reducing the additional-rate tax threshold from £150,000 to £125,140 in April 2023.

Those continuing to ride the wave of higher interest rates, and who are swept up by this ‘fiscal drag’ could see their PSA halved – or even axed completely. This means potentially paying tax on all interest earned through savings.

If you do get pushed into a higher income tax bracket, a Cash ISA can keep you earning interest without putting further pressure on your PSA. And if the government decides to reduce the PSA, you’ll be grateful for choosing a Cash ISA early on.

The best HL Cash ISA rate ever. And you can get a £100 bonus

Rates are climbing, but providers are offering even more ways to attract your cash.

For example, through our partner Coventry Building Society, we’re offering our highest ever limited access rate available on the platform – plus a £100 cash bonus. You’ll need to add £10,000 or more to the product by debit card between 14 February and 3 May 2023 to qualify for the bonus.

You could earn a return of up to 4% in the first year.

The 4% figure assumes the rate won’t change and is based on the rate of 3.00% AER (2.96% tax free) plus £100 bonus. If you deposit £10,001-£20,000, the effective return will be lower. If your Cash ISA balance drops below £10,000 or you close your HL investment account/Active Savings Account before 3 May 2024, we could reclaim the bonus. See full terms below.

The offer is only available for clients who already hold an HL investment account or Active Savings account before opening a new HL Cash ISA. You can set up an Active Savings account in minutes and get access to the Cash ISA offer and the full Active Savings service.

Products can be added or withdrawn at any time. ISA and tax rules can change, and benefits depend on personal circumstances.

FIND OUT MORE ABOUT OUR CASH ISA

What you need to know

Please make sure you read the correct terms. Terms differ depending on the accounts you hold in your HL portfolio.

Terms for existing investment clients

1. This Offer is only available to existing HL clients who held one or more of the following accounts prior to adding money to a HL Cash ISA between 14 February 2023 and 3 May 2023 inclusive (“the Offer Period”).

(a) HL Fund and Share Account;

(b) HL Stocks and Shares ISA;

(c) HL Lifetime ISA;

(d) HL SIPP;

(e) Drawdown;

(f) or any accounts held within HL Workplace, (each a “Qualifying HL Account”).

2. To qualify for the Offer you will need to open a new Cash ISA and add £10,000 or more by debit card to the [Coventry Building Society Limited Access – ISA (2)] Savings Product (the “Qualifying Savings Product”).

If Coventry Building Society launches another New Limited Access Savings Product available in the HL Cash ISA during the Offer Period, such product will automatically be deemed a “Qualifying Savings Product” for the purposes of this Offer.

3. If you satisfy all of the criteria listed in clauses 1 and 2 within the Offer Period, you will receive a cash bonus of £100.

4. We will credit the £100 by 24 May 2023. The payment will be paid into your HL Loyalty Bonus Account. We will notify you by email once the cash bonus has been added.

5. The maximum amount of cash you can receive under this Offer is £100, irrespective of how many Qualifying Savings Products you have.

6. We reserve the right to reclaim the cash bonus if:

the overall balance of your HL Cash ISA drops below £10,000 before 3 May 2024, unless this money is added to a Qualifying HL Account in your name; or

as at 3 May 2024, you no longer have any Qualifying HL Accounts.

We will notify you if we intend to reclaim the cash bonus and will claim it within 7 working days.

7. We reserve the right to amend, extend or withdraw this Offer if necessary, including for legal or regulatory reasons or otherwise. If the Offer closes early, all valid applications received up until this time will still be accepted. Details of any such amendment, extension or withdrawal will be posted on our website at www.hl.co.uk/savings.

8. This Offer will be governed by English law and, in participating, you submit to the jurisdiction of the English courts.

9. This Offer is provided by Hargreaves Lansdown Asset Management Limited, authorised and regulated by the Financial Conduct Authority (firm reference number 115248), which is a limited company registered in England & Wales with the company number 01896481, whose registered office is 1 College Square South, Anchor Road, Bristol, BS1 5HL. References in these terms and conditions to “our”, “us” or “we” are to Hargreaves Lansdown Asset Management Limited. The HL Cash ISA is offered through the Active Savings service provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 (firm reference number 901007) for the issuing of electronic money.

Terms for existing Active Savings only clients

1. This Offer is only available to clients who:

(a) either (i) already hold an Active Savings Account; or (ii) open an Active Savings Account between 14 February 2023 and 3 May 2023 inclusive (“the Offer Period”); and

(b) subsequently open a new HL Cash ISA during the Offer Period; and

(c) prior to opening such new HL Cash ISA during the Offer Period do not hold any account with us other than an Active Savings Account.

2. To qualify for the Offer you will need to open a new HL Cash ISA and add £10,000 or more by debit card to the [Coventry Building Society Limited Access – HL ISA (2)] (the “Qualifying Savings Product”) within your HL Cash ISA.

If Coventry Building Society launches another New Limited Access Savings Product available in the HL Cash ISA during the Offer Period such product will automatically be deemed a “Qualifying Savings Product” for the purposes of this Offer.

3. If you satisfy all of the criteria listed in clause 1 and 2 within the Offer Period, you will receive a cash bonus of £100.

4. We will credit the £100 by 24 May 2023. The payment will be paid into the Cash Hub of your Active Savings Account. We will notify you by email once the cash bonus has been added.

5. The maximum amount of cash you can receive under this Offer is £100, irrespective of how many Qualifying Savings Products you have.

6. We reserve the right to reclaim the cash bonus if:

(a) the overall balance of your HL Cash ISA drops below £10,000 before 3 May 2024, unless this money is added into a HL Fund and Share Account, HL Stocks and Shares ISA, HL Lifetime ISA, HL SIPP, Drawdown or any account held within HL Workplace (each a “Qualifying HL Account”); or

(b) as at 3 May 2024, you no longer have any Qualifying HL Accounts.

We will notify you if we intend to reclaim the cash bonus and will claim it within 7 working days.

7. We reserve the right to amend, extend or withdraw this Offer if necessary, including for legal or regulatory reasons or otherwise. If the Offer closes early, all valid applications received up until this time will still be accepted. Details of any such amendment, extension or withdrawal will be posted on our website at www.hl.co.uk/savings.

8. This Offer will be governed by English law and, in participating, you submit to the jurisdiction of the English courts.

9. This Offer is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 (firm reference number 901007) for the issuing of electronic money. References in these terms and conditions to “our”, “us” or “we” are to Hargreaves Lansdown Savings Limited.

This website is issued by Hargreaves Lansdown Asset Management Limited (company number 1896481), which is authorised and regulated by the Financial Conduct Authority with firm reference 115248.

The Active Savings service is provided by Hargreaves Lansdown Savings Limited (company number 8355960). Hargreaves Lansdown Savings Limited is authorised and regulated by the Financial Conduct Authority (firm reference number 915119). Hargreaves Lansdown Savings Limited is authorised by the Financial Conduct Authority under the Electronic Money Regulations 2011 with firm reference 901007 for the issuing of electronic money.

Hargreaves Lansdown Asset Management Limited and Hargreaves Lansdown Savings Limited are subsidiaries of Hargreaves Lansdown plc (company number 2122142).