Savers need at least £2,000 to invest and interest can be paid monthly or annually.
Commenting on the deal, Caitlyn Eastell, a spokesperson at Moneyfactscompare.co.uk, said: “UBL UK has increased the rate on its Two-year Fixed Rate Cash ISA this week, improving its overall position in the market.
“Now paying 4.61 percent on the account’s anniversary, savers who still need to maximise their ISA allowance may find this an appealing option.
“However, investors must be comfortable with their initial investment as further additions are not permitted and if they wish to gain earlier access to their funds it will be subject to 180 days’ loss of interest and account closure, so careful planning is crucial.”
Ms Eastell added: “Overall, the deal earns an Excellent Moneyfacts product rating.”
While UBL UK may be offering a more competitive deal, it doesn’t quite top the table. Zopa’s Smart Saver just takes the lead with an Annual Equivalent Rate (AER) of 4.62 percent.
Savers need a minimum deposit of £1 and interest is paid monthly.
Tax-efficient saving has now become “more important than ever” amid frozen personal allowances and higher interest rates. Tim Bennett, head of education at Killik & Co said: “The annual contribution limit [for an ISA] is a fairly generous £20,000 per person, whether the amount is all put into cash, stocks and shares, funds or a mixture of these.”
However, the £20,000 annual allowance is provided on a “use it or lose it” basis, meaning people have until the end of the fiscal year (April 5, 2024), to make the most of this year’s tax benefits.
Laura Suter, director of personal finance at AJ Bell, noted: “If you have this much money to set aside, make sure you’re using up your ISA allowance to protect your savings from unwanted tax. An ISA protects your investments from capital gains, dividends and income tax, so it’s the best place for your investments.
“Almost 2.75 million people in the UK are set to pay tax on their cash savings interest in 2023/24, with around one in 20 basic-rate payers paying tax on their cash interest, rising to one in six higher rate payers and around half of the additional rate payers, based on AJ Bell estimates.
“That’s because the Personal Savings Allowance (PSA) has been frozen at its current level since 2016.”
Current PSA thresholds mean basic-rate taxpayers can earn £1,000 in interest without paying tax, while higher-rate taxpayers can earn up to £500. Additional rate taxpayers get no exemption.
Once savers have breached the PSA they pay income tax on any savings interest over this limit.
Ms Sutter said: “Many people chose not to use ISAs for cash savings in recent years, with low-interest rates meaning interest earned fell within their Personal Savings Allowance. In many cases, non-ISA accounts also offered better rates, but for some people, the benefit of fractionally higher rates outside an ISA will now be wiped out by tax.”
She added: “The easy way to protect your cash from the taxman is to use a cash ISA, assuming you have allowance remaining.”