Castle Trust Bank has increased the interest rate on its fixed Cash ISA to 5.05 percent, earning an “excellent” Moneyfacts rating.
The interest rate is fixed for one year and the account can be opened with a minimum deposit of £1,000.
Commenting on the new deal, Caitlyn Eastell, a spokesperson at Moneyfactscompare.co.uk, said: “Castle Trust Bank has increased the rate on its one-year Fixed Rate e-Cash ISA this week.
“The account now pays 5.05 percent, taking a high position within its sector and may well appeal to savers looking to utilise their ISA allowance.
“Investors must have a minimum of £1,000 to open the account and it accepts transfers in from both Cash and Stocks and Shares ISAs.”
However, Ms Eastell noted: “This deal permits early access on account closure, subject to a 90-day loss of interest penalty.”
She added: “The account secures an Excellent Moneyfacts product rating.”
While Castle Trust Bank offers a more appealing interest rate, it isn’t currently topping the table in its sector. Virgin Money’s Fixed Rate Cash ISA Exclusive (Issue 10) remains top of the list for one-year fixes with an Annual Equivalent Rate (AER) of 5.25 percent.
There is no minimum investment amount to get started, interest is applied annually, and earlier access will be subject to 60 days’ loss of interest.
Placing just behind is OakNorth Bank’s deal offering an AER of 5.06 percent. The account can be opened with a minimum deposit of £1 and interest is paid monthly.
Savers should be comfortable with investing their money without dipping in to get the full benefits of the account as earlier access will be subject to 90 days’ loss of interest.
Cash ISAs are a popular savings option for Britons, as these accounts enable people to invest up to £20,000 a year without paying tax on interest.
However, this allowance has remained frozen since 2017. Some analysts have criticised this threshold as “outdated,” suggesting that the Chancellor “missed an opportunity” to raise it in this week’s Spring Budget.
Matthew Carter, head of savings at Coventry Building Society, said: “The move to add an extra £5,000 to benefit those with stocks and shares ISAs means the Chancellor has missed an open goal opportunity to increase broader cash ISA limits, and instead, adds further complexity across the ISA range.
“The £20,000 cash ISA limit set back in 2017 is outdated – adjusted for inflation, ISA allowance should be £26,400 today.
“With no change to income tax and no change to cash ISA allowances means millions more people will be paying tax on their non-ISA savings for the first time as rising interest rates use up their Personal Savings Allowance.”
Mr Carter added that frozen income tax thresholds mean 3.8 million more people will be paying higher taxes due to fiscal drag this tax year. Meanwhile, 1.4 million more will see their Personal Savings Allowance cut in half to £500 as they enter the higher tax band.
He continued: “Bank of England have held the base rate at 5.25 percent since last August and best buy savings rates are close to this today.
“This means a higher rate taxpayer earning this rate would start to pay 40 percent tax if they had just over £9,525 in savings. Basic rate taxpayers, including many pensioners in this bracket, would be taxed at 20 percent on balances of £19,050 or more unless they protect their savings from tax using an ISA.”
