Martin Lewis urges people to claim free £1,000 before tax year ends

By Hiyah Zaidi
Monday, 28th March 2022, 2:36 pm
Martin Lewis warns you only have days left to get free £1000 from government (Picture: ITV)
Martin Lewis warns you only have days left to get free £1000 from government (Picture: ITV)

Martin Lewis is urging savers to “use or lose” their ISA allowances before the end of the current tax year.

A cash ISA account is a savings product where you don’t pay tax, up to a limit of £20,000 for the 2021/22 tax year.

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What is a LISA?

With a Lifetime ISA (LISA), you can put away £4,000 each year and the government will give you a bonus 25% on top of any cash you save.

This means that you can get £1,000 free each tax year and those who are in a couple could get up to £2,000 if you both have a LISA account that you max out.

However, the deadline to make the most of the LISA free money is fast approaching as the current tax year will come to an end on 5 April, meaning there’s not long left to get any bonus payment from the government.

In the latest MoneySavingExpert email, Martin Lewis said: “If you’re a first-time buyer, check out the Lifetime ISA’s 25% boost worth up to £1,000/year on your first home”.

The amount you put into your LISA will count towards your overall yearly £20,000 ISA allowance.

If you are saving for your first home, you won’t find a regular savings account from a bank or lender that pays 25% interest.

Anyone aged between 18 and 39 can open a LISA account, and it can be used to put a deposit toward your first home or for retirement.

But taking out your money for anything other than these reasons will result in losing your bonus and you may pay a 25% penalty, which works out at around a 6% loss.

What about cash ISA rates?

Martin Lewis issued a bleak statement that 85% of people are now better off ditching cash ISA rates.Right now, cash ISAs usually have worse rates than normal savings accounts.

The financial guru said that instead of stashing your money into an ISA, you should be focusing on an account with the highest interest.

Martin explained: “Now the personal savings allowance means most DON’T pay tax on savings interest.

“The PSA launched in 2016, allowing basic (20%) taxpayers to earn £1,000/year of any savings interest tax-free and higher (40%) taxpayers £500.

“At today’s top easy-access 1% rate, you’d need a hundred grand saved to generate £1,000 interest. So these days, most people - over 19 in 20 in fact - don’t pay tax on savings anymore.”