Money-saving expert Martin Lewis is back with a few more money-saving techniques and he’s now adapted his expertise to bank accounts. He warned Britons to have some type of bank account and said if you have one you should close it now as it is of next to no use. In the past, Martin had actually advised people to open one, but now he says they are of no use.
Previously, Martin encouraged people to open I SA savings accounts which are a type of savings pot that allows you to earn interest without paying tax on the savings. You can save up to £20,000 per person per tax year. You can only open one a year and since telling people to open one, Martin has explained why he now thinks it’s a bad idea, reports Manchester Evening News.
He said people should ditch the account because of the low interest rates. He went to his Money Saving Expert website and said that with the highest ISA interest rate at 1.5%, it would take £70,000 in savings to generate around £1,000 a year. This is due to changes with the launch of the Personal Savings Allowance in 2016.
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A PSA means that 20% base rate taxpayers can earn up to £1,000 in interest a year on all savings without paying tax on it; after that, their interest is taxed at 20%.
As Martin explains, taxpayers with a rate above 40% can earn up to £500 a year; after that, their interest is taxed at 40%. The top 45% of taxpayers do not receive PSAs – all of their interest is taxed at 45%. To qualify for the cash ISA, you must earn above this threshold to feel the benefits. Those with savings or income large enough to exceed the limit can further protect the interest from tax. Offering even more advice, Martin also shared advice on different types of ISAs like the lifetime one.
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