But what to do with those extra funds apart from go on a shopping spree?
Individual Savings Account (ISA)
Make your savings work for you by opening an Individual Savings Account and using your annual tax-free allowance.
The Individual Savings Account allowance for 2021-22 of £20,000 lasts until 5 April 2022 at which point it re-sets for another tax year.
This means that you can invest in cash or shares then earn interest without paying any income tax on it. If you invest in a shares-based ISA any returns made are also tax free.
Shop around for the best deals often available on comparison websites.
Transfer funds from an existing ISA
You can also transfer funds from an existing ISA into one with a better rate if the initial deal has come to an end. It’s worth reviewing historical pots to see whether they are earning anything at all.
Types of ISA
- Cash ISA
- Stocks and Shares ISA
- Innovative Finance ISA
- Lifetime ISA
Junior ISAs are also available to invest for children under 18.