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Isa allowances renewed this month – is now the best time to open an account?
Isas allow you to save up to £20,000 a year without paying tax on interest
This April marks the start of the new tax year, meaning your Isa allowance has now reset. Isas allow savers to put away up to £20,000 a year without paying tax on the interest they earn.
However, not everyone understands how the allowance works. A survey by Shawbrook Bank found a third of savers had no idea their allowance resets on 6 April, while one in 10 believed it happened monthly.
Understanding how Isas work is crucial to making the most of your tax-free savings. Read on to find out why the beginning of the tax year is a great time to open a new account.
6 reasons to open an Isa early
The term Isa stands for 'individual savings account' and you can save up to £20,000 tax-free every year. Savers currently have a choice of five types of adult Isa, plus the Junior Isa (Jisa) for children.
The most popular product is the cash Isa, which essentially works the same way as a traditional savings account.
You can open an instant-access Isa if you want the option to regularly withdraw money, though these accounts come with variable interest rates, which can change at any time.
On the other hand, fixed-term Isas involve locking your money away for anywhere from one to five years, but you benefit from guaranteed interest rates.
Whether you're a current Isa saver or newbie, there are a number of advantages to opening an account at the beginning of the financial year.
1. Interest rates are usually higher
Rates get a boost during 'Isa season' between February and April.
The end of a tax year and start of a new one sees many providers offer attractive interest rates on Isa products to entice savers.
The table shows the top rates currently available on instant-access and fixed-term cash Isas, ordered by term.
We've excluded deals that come with opening restrictions, for example requiring you to already have a bank account with the provider.
| Instant access | Moneybox | 5% (a) | 83% | £500 | Internet, mobile app | Anniversary |
| One-year fixed rate | Gatehouse Bank (s) | 4.35% | n/a | £1,000 | Internet | Monthly, on maturity |
| Two-year fixed rate | UBL UK | 4.26% | n/a | £2,000 | Branch, internet, mobile app, postal | Monthly, anniversary, on maturity |
| Three-year fixed rate | UBL UK | 4.21% | n/a | £2,000 | Branch, internet, mobile app, postal | Monthly, quarterly, anniversary, on maturity |
| Four-year fixed rate | UBL UK | 4.05% | n/a | £2,000 | Branch, internet, mobile app, postal | Monthly, quarterly, anniversary, on maturity |
| Five-year fixed rate | UBL UK | 4.21% | n/a | £2,000 | Branch, internet, mobile app, postal | Monthly, quarterly, anniversary, on maturity |
Source: Moneyfacts. Correct as of 16 April 2025, but rates are subject to change. Provider customer score is based on savers' overall satisfaction with the brand and how likely they are to recommend it to others. n/a means sample size was too small for us to generate a provider score. (a) Rate drops to 4% after 12 months. (s) This is a Sharia-compliant product, and so offers an expected profit rate (EPR) as opposed to an annual equivalent rate (AER)
- Find out more: best cash Isas 2025
2. Longer to use your allowance
The £20,000 Isa allowance resets every year on 6 April, and if you have the funds to do so, you could consider maxing it out early.
Investing earlier not only removes some of the pressure to make a hasty decision at the end of the tax year, but also means your cash will be put to work for longer.
As most people don't have £20,000 to deposit as a lump sum, starting early also means you can spread payments into an Isa over the course of the year.
This means you can budget your savings more easily and will be more likely to make full use of your allowance.
- Find out more: cash Isa rules and allowances
3. Shield from tax rises
While opening a cash Isa will help shield your savings from income tax, a stocks and shares Isa can help you sidestep paying capital gains tax (CGT) on your investments. Plus, any income such as interest or dividends will also be free from tax.
This financial year, stocks and shares Isas could prove a particularly popular option for investors looking to shelter their money from higher CGT rates introduced at the end of October following the Autumn Budget.
- Find out more: what is a stocks and shares Isa?
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Sign up now4. Benefit from compounding
Compound interest is when savings interest is added to your balance, increasing the interest you subsequently earn.
The sooner you save, the more time your cash will have to grow – so don't hang about waiting for rates to go up again if you have money that could be earning interest now.
5. Avoid future rate cuts
Locking your savings away in a fixed-term cash Isa will guarantee you the same rate for longer.
While interest on cash Isas tends to get a boost in the spring, the future outlook looks less certain, with rates on other types of account falling.
If you're worried about putting all your eggs in one basket, you could take advantage of rules that allow you to open multiple Isa accounts of the same type.
You can place a portion of money in a fixed-term Isa and another chunk in an instant-access account, which you can easily dip into in emergencies or move to another product if you see a better deal later.
If you've got savings you won't need for at least five years, you may earn a better return by investing with a stocks and shares Isa instead.
6. Protect yourself from potential reforms
The days of cash Isas as we know them could soon be numbered.
The Spring Statement in March confirmed that the government is considering reforms, although no specific details were mentioned.
There has been speculation that the government wants to push savers away from cash Isas and encourage them to invest in stocks and shares products instead.
To achieve that, the annual tax-free allowance on cash Isas could be drastically cut.
We don't know whether this shake-up will happen, but savers would be wise to take advantage of the current £20,000 allowance now before it potentially disappears in the future.
