Back to July 2015

Savers still seeking out tax-free home for their cash

Changes to tax on savings announced in the spring Budget have had little effect so far on demand for ISAs, Leeds Building Society has found.

In the final Budget of the last Parliament, George Osborne announced the first £1,000 of income on savings would be free from income tax from the start of the next financial year in 2016, prompting questions about the future of ISAs, which already pay their interest tax-free.

However, since the start of the current 2015/16 tax year the most popular of Leeds Building Society’s competitive ISAs was a two year fixed rate deal which matures in 2017, more than a year after the change to the savings allowance. The Society also saw strong demand for its three year fixed rate ISA.

“After the Chancellor’s announcement in March about changing the tax allowance for savings interest, consumers might have been expected to focus on instant access or one year products in readiness for moving their money to a non-ISA account when the changes come into effect,” said Jaedon Green, Leeds Building Society’s General Manager – Product Development.

“However, we’re still seeing strong demand for ISAs, particularly those for fixed terms of two years or longer.

“While the majority of savers will benefit from the tax changes coming into force in April, it seems that plenty of people still want a specific account which pays interest tax-free if they feel the return is competitive.”

Leeds Building Society has refreshed its range of competitive ISAs, including a new 1.75% tax-free pa/AER* two year fixed rate cash ISA.

The Society’s instant access ISAs – Everyday ISA and its online equivalent, E-ISA, pay a competitive 1.25% tax-free pa.

Ends

Notes to Editors

Tax-free means that interest payable is exempt from income tax.

*AER stands for Annual Equivalent Rate and illustrates what the interest rate would be if interest was paid and added each year.

Awards won by Leeds Building Society in the past 12 months include the ‘Innovation Award (Lenders)’ at the Mortgage Finance Gazette Awards 2015, in addition to being named ‘Best Intermediary Lender’, both for the second consecutive year. The Society also received the award for ‘Best Use of Technology (Lenders)’.

Leeds Building Society has 67 branches throughout the UK, Gibraltar and Ireland and assets of £12.1bn (as at 31st December 2014). The Society has operated from the centre of Leeds since 1886.