ISA savings expert issues tip to savers that can add up to £1,000 extra a year

A savings expert has highlighted that the government could be handing out up to £1,000 a year to eligible savers.

With the new 2024-25 tax year underway since April, it's prime time for individuals to decide where to invest their money. One particular account is offering as much as £1,000 annually in government bonuses.

Despite savers currently benefiting from some of the most competitive interest rates in recent times, there's a chance that some might begin to incur tax on their growing savings. Basic rate taxpayers have the advantage of earning up to £1,000 in interest without the burden of tax, while this figure is halved for higher rate taxpayers at £500.

Read more: DWP crackdown could see millions of people lose benefit payments

ISAs stand out as a tax-savvy saving method, potentially making them a more appealing choice for many. For those pondering over which ISA to opt for, TSB's head of savings, Peter Hatton, offers valuable advice.

For those who need swift access to their funds, Hatton recommends: "An instant access cash ISA is great if your priority is flexibility and ready access to your savings.", reports Wales Online.

However, he cautions that these accounts typically come with a variable interest rate, meaning "so you may get a lower return on your balance if rates fall".

When it comes to fixed-rate ISAs, Hatton didn't provide a direct quote in the provided text, so no further information can be given.

"If you're prepared to lock your money away, then a fixed-rate product is a good way to protect your savings when interest rates could drop, because the interest rate is guaranteed for the term of the product," Hatton explains. "Many of the fixed-rate ISAs available today offer lower rates than they did a few months ago because banks are already anticipating a lower (Bank of England) base rate in the future. But it could still be wise to lock in the guaranteed return offered by a fixed-rate product."

For those looking for a middle ground, Hatton suggests diversifying: "Many banks offer a range of fixed-rate accounts, with different terms and different interest rates."

When it comes to limited access accounts, Hatton advises: "Some banks offer limited access or defined access ISA accounts. These can be ideal when you want a better return than you'd get from a pure instant access account, but with greater flexibility than a fixed-rate product."

It's important to fully understand the withdrawal conditions and whether these accounts provide sufficient flexibility alongside a reasonable rate.

Regarding stocks and shares ISAs, Hatton points out that using part or all of the £20,000 annual ISA allowance to invest in the stock market is an option. "This approach is normally only appropriate for individuals who are prepared to put their money away for longer timescales - typically at least five to 10 years," he notes.

"And remember, the value of your investment can go down as well as up. Always make sure you do your research before investing and consider seeking financial advice."

Lifetime ISAs are a boon for those saving towards their first home or retirement nest egg. You're allowed to contribute up to £4,000 annually until you hit 50, but you need to open one before your 40th birthday.

The government sweetens the deal with a 25% bonus on your savings, which could mean an extra £1,000 each year until you're 50. For the younger savers, Junior ISAs instil the savings habit early on.

Hatton advises: "It's a great way to save for your kids' future but remember you can't take money out of a Junior ISA until the child turns 18 - so this isn't a good option if you think you might need access to the funds."