The 46-year-old has made his name as a financial guru, offering his fans no shortage of money saving advice. Today, Martin Lewis addressed the topic of cash ISAs, while appearing on the ITV show Good Morning Britain. During his latest instalment, the broadcaster explained he was doing a “U-turn”. So, what does he suggest savers in the UK do?
“For years I always used to say your money is nicer in a cash ISA
Martin Lewis, Money Saving Expert
Addressing the matter of cash ISAs, Martin revealed that up until April 2016, he had been advising his fans to get one of these savings accounts.
“For years I always used to say your money is nicer in a cash ISA,” he said in the segment.
“A cash ISA is just a tax-free savings account, a normal savings account you just don’t pay tax on it and you can currently put £20,000 in a year.”
Martin explained that he had gone on to opt against cash ISAs from April 2016, and this was because the personal savings allowance (PSA) meant that basic 20 per cent rate tax payers could earn £1,000 in interest each year, without paying tax.
This is equivalent to scooping interest on £67,000 of your savings in the top easy access rate.
Similarly, the higher 40 per cent rate tax payers could earn is £500 tax-free on an annual basis.
Martin Lewis: The Money Saving Expert shared his top tips on Good Morning Britain (Image: GETTY • ITV)
This meant that 95 per cent of people wouldn’t pay tax on their interest savings anyway.
Martin added: “So, for most people cash ISAs aren’t relevant, because you don’t pay tax on interest anyway.”
“Cash ISAs have always paid slightly less than other savings accounts.”
However, Martin pointed out how Coventry BS has now launched a cash ISA which pays 1.5 per cent interest – which is the same as the top comparable normal savings from Marcus Bank.
“That’s the first time in a long time that we’ve seen cash ISAs pay the same rate as top normal savings,” he said.
Martin Lewis: The Money Saving Expert recommended the bank account in order to see savings grow (Image: GETTY)
Martin Lewis Money Saving Expert: You don’t have to pay tax on savings in a cash ISA (Image: GETTY)
“Therefore, everybody now should be considering a cash ISA if you’re looking for easy access savings.”
But, while you may want to take out a cash ISA with the bank now, Martin reminded viewers that they needn’t be loyal if the rate drops.
That’s because this cash ISA has a variable rate, so if normal savings accounts improve or the rate dramatically drops, it could make sense to move.
To find out more and sign up to Martin Lewis’ weekly newsletter, visit www.moneysavingexpert.com/latesttip.
Good Morning Britain airs weekdays from 6am on ITV.