Isas and Nisas a way for savers to beat taxman
It's just a week until you have the chance to stash money away in so-called New Isas (Nisas).
The savings schemes were trumpeted by the chancellor when he announced his budget in March. The headline change is that the amount you can save tax-free is increasing to £15,000 from £11,880.
As part of that, you'll be able to keep your whole Nisa allowance in cash savings, meaning the limit will actually climb from its existing level of just £5,940 – half the total Isa allowance – to £15,000.
So Nisas should be considered by anyone who has cash on deposit. Why? Because paying tax on your savings seems a little silly if the government encourages you to avoid doing so.
If you're a basic-rate taxpayer, the rate you can get through a Nisa is worth 20% more than outside the tax-free environment. If you're a 40% taxpayer, the rate is actually worth 40% more.
So the companies that offer Isas and Nisas are expecting the biggest move to come from savers who are waiting until tomorrow week to transfer cash out of low-paying deposit accounts into slightly higher-paying Nisas.
The main problem is that, behind the Nisa hype, interest rates for savers are still lamentable.
However, even though they are at record lows, things are getting better. With inflation falling to 1.5%, as revealed by official figures at the weekend, there are more savings accounts that actually offer inflation-beating returns now than for a long time.
If you look at standard tax-paying accounts you wouldn't think so. Analysis by Moneyfacts suggests that just 72 of the 619 in the market today negate the effects of inflation.
When it comes to Isas the picture is much more positive. More than half – 115 out of 215 – now offer rates that beat inflation. And there are likely to be better offers coming as Nisas launch on July 1.
Yet millions of savers don't use the tax-free accounts, according to research by NFU Mutual. It reckons 12.5 million adults save or invest without making use of Isas.
"By not making use of an Isa, savers and investors could be giving money to the taxman unnecessarily," says Sean McCann of NFU Mutual.
Meanwhile Fidelity suggests that savers who use their full Nisa limit could be Isa millionaires.
The truth is that making use of Isas – and from tomorrow week Nisas – makes sense. The decision is whether to go into cash or equities.