Martin Lewis: Got a cash ISA? You should probably ditch it

All a cash ISA is, is a savings account you don't pay tax on

These days, the cash ISA's main boon is that interest from it doesn't count towards the PSA: it's still tax-free on top of that. That means for the few with savings (or earnings) big enough to break that limit, it's a winner, as they can protect more interest from tax.

You get a £20,000 ISA allowance each tax year and, crucially, money you put into an ISA stays tax-free year after year.

Yet for MOST, there's no benefit of saving in a cash ISA – so you simply should focus on getting the highest interest rate. Over the last few years, cash ISAs have tended to have WORSE rates than normal savings across all categories. At the time of writing...

So most should DITCH cash ISAs for accounts that pay more

When I polled this on Twitter recently, I found 85% of the 9,000 who said they had cash ISAs don't pay tax on savings.

So why keep them? I know for years many had it drilled into them (often by me) that cash ISAs were nicer – but now people need deprogramming and to be pushed to just focus on the highest interest rates which come from top normal savings. Be brave, ditch the cash ISA and earn more.

However, there are a few niche reasons you may want to keep a cash ISA...

- If you're close to paying tax on savings. If you've a good whack of savings (many tens of thousands, say), so are close to the limit where you'll pay tax, then, as interest rates are likely to rise, keeping money in cash ISAs now can protect you from future tax.

Remember though: if you haven't used your cash ISA allowance for the current tax year, you can shift £20,000 in whenever you need (and another £20,000 in as soon as the next one starts), so if things look like they're changing, this gives you some instant 'reaction room' to change stance and get money back in ISAs at speed.

Based on current rates, keeping some savings in a cash ISA for this future-proofing still only looks worth it for higher 40% rate taxpayers, as the top current savings would still pay more than the top cash ISAs even after basic 20% tax is taken off (though of course the rate differential between savings and cash ISAs may change in future).

- You can withdraw from fixed cash ISAs (unlike normal fixes). There are big interest penalties for doing so, but if you could get a good cash ISA fix rate and wanted access in an emergency, they are more flexible.

Claiming universal credit or working tax credits? Get a 50% boost

While not an ISA, just a quick final mention for the Help to Save scheme. This is designed to let those on low incomes save up to £50 a month, with a stonking 50% bonus paid after two years.

Crucially, the bonus is based on the highest amount you had in the account over that time – so imagine you put in £50 a month for 10 months, had £500 in there, but needed to withdraw it, then couldn't afford to put any more in. That's all fine and you'd still get a £250 bonus at the end (50% of the max £500 you had in).