If you want to grow your money, it’s worth taking a moment to review where you’re keeping it.
It can be difficult to choose between all the different savings products on the market, but it’s important to ensure you’re selecting the best ones for your specific financial goals.
And right now, one option is proving particularly in demand…
Cash ISAs allow UK residents over 18 to save up to £20,000 a year without paying income or capital gains tax.
While Cash ISAs have always been popular, there are a number of reasons why they could be especially valuable in the current financial climate.
Below, we reveal six of them, courtesy of the experts at smart money app Plum –
Cash ISAs – like those offered by smart money app Plum – are attracting plenty of attention at the moment
1. You can get higher interest rates
An astonishing £360 billion is currently sitting in UK current and savings accounts earning 1% interest or less, according to estimates¹.
However, many Cash ISA providers now offer competitive rates above 4%, making them an attractive option for savers looking to make their money work harder.
With the Plum Cash ISA, you could access a competitive rate of up to 5.04%* AER (variable – as of 25/03/2025), which includes a new customer bonus of 1.50 per cent (AER) (variable) if kept for 12 consecutive months.
The interest rate for ISA transfers and for existing customers is 3.54 per cent (AER).
This means that if you saved £20,000, you could earn £1,004 of interest after 12 months.
That’s a significant amount of money, particularly if your savings were previously in a bank account earning very little interest!
With the Plum Cash ISA , you could access a good rate of up to 5.04%* AER (variable)
2. Any interest is tax free
Unlike regular savings accounts, you do not have to pay tax on interest earned in a Cash ISA.
This means there’s no need to worry about exceeding your Personal Savings Allowance, which is £1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers and £0 for additional-rate taxpayers.
Paying no tax on your interest payments means your savings will be able to grow faster than they otherwise would – making your financial goals more achievable.
3. We’re paying more tax
If you’ve been following the news, you’ll know that the amount of tax many of us are having to pay is rising.
With the freezing of personal tax thresholds and more people being dragged into higher tax bands due to fiscal drag, tax-efficient options have become even more valuable.
While most of us aren’t in a position to dictate government policy, opening a Cash ISA could allow you to protect the savings you already have.
Keep in mind, tax treatment depends on your personal circumstances and is subject to change
Tax-efficient options have become even more valuable as more people are dragged into higher tax bands
4. They are lower risk
One of the most important factors when deciding the best place to put your money is your attitude to risk.
Experts generally recommend only investing money that you do not intend to use within five years.
If you are looking to spend your savings before that or set them aside for a rainy day fund, you may be less likely to want to take any risk – meaning a Cash ISA could be a good option.
It’s worth checking that yours is protected by the Financial Services Compensation Scheme (FSCS), which covers up to £85,000 per person, per financial institution.
A Plum Cash ISA is held with Citibank or Lloyds, which are both FSCS protected.
Click here to learn more about how your money is protected.
Your attitude to risk is an important thing to consider when deciding where to put your money
5. ISA allowances are generous
The current £20,000 ISA limit is considered fairly generous, not least when it renews every tax year.
This means that if you use your whole allowance in one year, the original £20,000 and any interest you receive will stay tax free in perpetuity, as long as you keep it within an ISA wrapper.
Remember though that any of your ISA allowance that goes unused over each tax year (which runs from April 6 to April 5) will be lost at the end of it.
So if you’re interested in opening a Cash ISA, it’s better to act sooner rather than later!
UK residents can benefit from a generous annual ISA allowance of £20,000
6. There are easy access options
If you are likely to draw on some of your savings to pay for immediate spending needs, then flexibility is key. Fortunately, there’s no need to lock your money away for the long term.
It’s quick and easy to withdraw from your Plum Cash ISA, with withdrawals paid in one working day. You can withdraw money up to three times a year without affecting the Plum Bonus rate, after which it drops to 2.50% AER (variable).
Plum offers a series of clever auto saver rules, which can help you stash away more money over time.
By enabling the ‘Automatic’ function, the app’s powerful algorithm calculates what you can spare before setting it aside for you every so often.
Another option is Round Ups, which rounds up your spending to the nearest pound and banks the difference.
Keep in mind, you should still review periodically that automation is suitable for your circumstances.
Plum offers one of the most competitive Cash ISAs out there.
You can open your Cash ISA in your Plum app straight away with as little as £1.
And if you’ve already got one with another provider, you can transfer it over in minutes.
Plum uses automation to help you stash more money away
All you need to get started is the Plum app and your National Insurance number.
It’s that easy!
Click HERE to open a Plum Cash ISA and start your weekly tax-free savings habit today!
Plum does not provide financial or any other form of advice.
*Rate as of 25 March 2025.
¹CACI’s Current Account & Savings Database (CSDB), Rest of Market Stock at September 2024.
