WITH the Bank of England base rate having stood at a rock-bottom low for seven years, the returns on offer have been paltry.

By March 2016, the average easy access cash ISA was paying a rate of just 1.05%, compared with 1.77% in March 2009, according to financial information website, Moneyfacts.co.uk.

But there is some fresh hope for savers in the form of a new personal savings allowance, which will come into force on April 6, to coincide with the new tax year.

The new allowance means most people will no longer pay tax on the interest they earn on their savings pots.

Banks and building societies will stop deducting tax from account interest.

If you are a basic rate taxpayer you will be able to earn up to £1,000 in savings interest tax-free, while higher rate taxpayers will be able to earn up to £500.

Savings income includes account interest from bank and building society accounts, as well as accounts with some other providers, such as credit unions and Treasury-backed National Savings and Investments (NS&I).

It also includes some other types of income, such as that from government or company bonds.

Money held in tax-free ISAs will not count towards the allowance as this cash is already ring-fenced from the taxman.

You don’t need to do anything to claim your allowance, but if you are a basic rate taxpayer and earn interest of more than £1,000, or a higher-rate taxpayer earning interest of more than £500, you will still have to pay some tax on this.

If this is the case, HM Revenue and Customs (HMRC) will normally collect the tax by changing your tax code. Banks and building societies will give HMRC the information they need to do this.

Should we forget getting an ISA?
Does this mean we should forget ISAs?
THERE are already quite a few places outside an ISA where you can find decent rates – for example, several current accounts now offer rates of 3, 4, and 5 per cent.
But, while interest rates generally are low, it’s also important to consider what will happen when rates eventually start to increase – and the amount of cash you earn in interest also starts to go up. It could mean more of your personal savings allowance gets used up, and you may start to go over it and be liable for tax on your savings once more. Once money is in an ISA meanwhile, it is ring-fenced from the taxman for good, until it is withdrawn.
And there was a boost for ISA savers in the recent Budget. It was announced that the total annual amount you are allowed to save into ISAs will increase, from its current level of £15,240 to £20,000 from April 2017.
It’s also worth considering saving into a new Lifetime Isa, details of which were also announced in the Budget.
The new Lifetime ISA accounts, set to be available by April 2017, can be opened by people aged between 18 and 40, and any savings they put in before their 50th birthday will receive an added 25 per cent government bonus.
This means 25p will be added by the government for each £1 put in by the saver up, until the age of 50.
The new Lifetime ISA accounts, in which people will be able to save up to £4,000 a year, are intended as a way for younger people to save for their first home, and their retirement, in the same pot.
The new scheme will mean that over their lifetime, savers putting £128,000 away will be able to get a bonus of up to £32,000, plus any growth on their investments.
The UK Government also launched Help to Buy ISAs, which help first-time buyers save for a deposit by offering a bonus.
The maximum Government bonus from a Help to Buy ISA is £3,000. To receive that, someone will need to have saved £12,000.