Cash ISA savers issued three-month warning ‘don’t leave it too late’

savers have been issued a three-month warning as accounts holding billions are set to mature at the end of April.

Research by Paragon Bank shows a staggering £53.9billion in Cash ISAs will reach maturity between January and April, with £36.4billion of that amount held in one-year fixed-term accounts.

A further £15billion is held within accounts which were opened with a term of up to between 18 months and two years year.

Derek Sprawling, savings managing director at Paragon Bank, said: “Last year was one of the busiest ISA seasons on record, and at Paragon we experienced a record-breaking day on the first working day of the new tax year.”

Mr Sprawling has urged savers to be proactive and prepare for the forthcoming ISA season.

He added: “Over two-thirds of cash ISA savings set to mature by the end of April are in one-year accounts.

“These savers will likely observe a slight decrease in market rates compared to the same period in 2024, while those with funds maturing in longer-term accounts should benefit from higher rates.”

Sharing a few tips to prepare, Mr Sprawling first urged savers to use their Cash ISA allowance or use it when the new year starts again on April 6.

The savings expert said: “Each individual aged 18 or over benefits from a £20,000 ISA allowance every tax year from the Government. This means that they can save this amount in an ISA each tax year and never pay a penny of tax on generated from the balance for life.”

However, he pointed out: “Any unused allowance in the tax year will be lost as unused allowance cannot be rolled over into the next tax period.”

Secondly, Mr Sprawling urged people with maturing ISAs to act early.

He explained: “ISA season is extremely busy for providers, with high volumes of account openings and transfer requests.

“To better handle the high volumes, savings providers can take popular products off the market or make certain products available only to existing customers. Therefore, if savers are thinking of opening a new ISA this tax year or transferring an existing ISA balance to a new account, don’t leave it too late.”

People should also look for flexibility, the savings expert suggested.

He said: “A flexible ISA allows you to withdraw money from your ISA during a tax year without impacting your allowance for that period. For example, if you have £20,000 saved in that tax year’s ISA and withdraw £5,000, you can top it back up by £5,000 to ensure your allowance is utilised.”

Additionally, he noted: “Some ISA providers allow you to choose from a range of ISAs, not just a single type. For instance, you may wish to allocate some funds into a fixed-rate ISA while retaining access to some of your cash for emergencies.”

Sharing another tip for savers, Mr Sprawling advised not to focus solely on this tax year’s ISA rates. He recommended reviewing the returns from previous years’ ISA subscriptions to ensure they remain competitive.

He added: “Transferring an ISA balance to benefit from higher rates is simple, with most providers facilitating the process. You can transfer all or part of your ISA savings, but remember not to withdraw the funds yourself as you will lose the tax advantage of the ISA.”

Finally, people should consider how their income could affect their savings tax status.

For many years, ISAs were overlooked by savers, as the interest generated from savings was not enough to exceed an individual’s Personal Savings Allowance (PSA). The PSA allows individuals to earn a certain amount of interest on their savings without incurring income tax.

The current thresholds are as follows: basic-rate taxpayers can earn up to £1,000 of interest income tax-free, while higher-rate taxpayers can earn up to £500 of interest income tax-free. Additional-rate taxpayers, however, do not have a PSA, meaning all of their interest income is subject to income tax.

Mr Sprawling said: “With income tax thresholds frozen until the 2027/28 tax year, increasing numbers of people have become higher-rate taxpayers, meaning their PSA is halved overnight.

“If you are expecting an increase in your income that may push you into a higher tax band, then an ISA could be a sensible option to shield your savings interest from tax.”