Martin Lewis has issued a warning to anyone who is saving money in a cash ISA. The consumer champion has warned that while cash ISAs used to be the go-to option for savings, these days not everyone is benefiting from them.
An Individual Savings Account - or ISA - is a savings account which allows people to save a certain amount of money each year without paying tax on the interest. For those who have amassed a lot of savings over the years, this can add up to a lot of money.
But speaking on The Martin Lewis Money Show Live tonight (Tuesday), Martin warned that most people asking about ISAs will not be benefitting from them. That's because you now don't save money on the first £1,000 of interest you earn each year.
"You would need nearly £35,000 before any of your money is taxed," Martin said. "As most people have less than £10,000 in savings, well you pay tax so you want to put your money where you get the highest rate of interest."
The interest rate on ISAs is currently much lower than the best standard variable savings rates (accounts where the saving rates can change over time but which allow you to access your money when you need it). That means for anyone who does not pay tax on their savings it is best to keep your money in one of these accounts rather than an ISA.
"Just put it in the top standard savings account unless you are in the top band of savers or are close to the point where you might start to pay tax," Martin explained.
The Martin Lewis Money Show Live is on ITV1 on Tuesdays at 9pm or you can catch up on ITVX
