ISA rates on the up! 7 per cent increase year-on-year

Analysis by MoneySupermarket.com shows the average of the top five cash ISA rates is currently 3.03 per cent, a 7 per cent increase compared to this time last year when the average rate was 2.83 per cent.

In the last few weeks, we have seen new cash ISAs coming onto the market including Cheshire Building Society offering a market leading rate of 3.06 per cent. A recent site poll run on MoneySupermarket.com found nearly one in seven (13.7 per cent) still plan to save into an ISA before the current tax year ends. With a few months to go until the end of this tax year, consumers should be looking to maximise their ISA allowance and not wait until the last minute. Taking advantage of the good rates available now will allow savers to benefit from accruing additional interest immediately.

Kevin Mountford, head of banking at MoneySupermarket.com, said: "Despite the end of the tax year being two months away, it is great to see that the top paying rates on cash ISAs are already ahead of those from the same time last year. Anyone who has not opened an ISA yet can take advantage of these great rates and benefit from two months' interest rather than wait until the last minute to use their allowance.

"If you are a UK taxpayer, then opening a cash ISA to take advantage of your tax free allowance is a no brainer Likewise, if you have savings in ISAs you have opened in previous years, then it is worthwhile checking the rates being paid, as it is likely that you will be on a low rate. Switching an existing ISA balance to a market leading deal with allows transfers in can help maximise your savings pot. However, make sure you follow the official ISA switching rules otherwise your savings will lose their tax free status. "

The site poll also found almost a fifth of Brits (19.5 per cent) just can't afford to save at the moment so have not used their ISA allowance this year and a further 6.7 per cent won't bother to take advantage of the tax free benefits.

Kevin Mountford continued: "No matter how small the amount you are able to save, it's really important you make the most of the cash you put away. If you cannot afford to save, then review all of your outgoings and try and free up some cash which can then be used for savings. Even if you cannot afford to use the entire ISA allowance for this tax year, it is still worth opening an ISA, especially if you have existing savings held on other accounts elsewhere. The maximum cash ISA allowance is £5,340 for this tax year, increasing to £5,640 from April 6, 2012."