To wonder if some people deliberately don’t use Cash ISAs even when they could?

[SpryNavyHelper]

Cash ISAs are often talked about as the obvious place to put savings because of the tax-free wrapper but in practice the interest rates don’t always seem that competitive compared to standard savings accounts.
It made me wonder whether some people actively choose not to use them, even if they’re eligible, and instead prioritise better rates or flexibility elsewhere. I suppose it also depends on things like how close you are to your Personal Savings Allowance and whether the tax benefit actually makes a difference in your situation.

AIBU to think they’re not always the best option?

What do you mean "deliberately" don't use them? I don't think anyone slips and chucks £1,000 into an ISA.
Obviously if you can get a better rate elsewhere (including the tax benefit) then choose that?
Why is this a question? Why is it an AIBU?

You're right - if you're going to get under £1000 in interest then it's tax free anyway. So you don't need the ISA then

in practice the interest rates don’t always seem that competitive compared to standard savings accounts

That might be true if youre not a higher rate tax payer and if your savings earn less than £500 interest. If those are true, having tax free interest tips the balance in favour of the ISA.

For many, many years the interest rates on ISAs were pitiful. That's changed now and you can get a competitive rate even on fixed ones.
However unless you are earning over £1000 interest (£500 for HR tax payers) there's no advantage.
We used them to the max, my DC tend to use them for stocks and shares so not cash ISAs.

Money saving expert suggested not bothering with cash is as if your interest is under 1k and you can get better rates elsewhere..

I think this is short sighted. You could build up a fair pot of cash savings then the rules change and you can't put it all into an isa.

If rates are similar I'd choose the isa.

I mean people consciously choosing not to use them, even when they’re often presented as the default option. Just wondered how many people actually make that choice in practice vs automatically using them.

Interest rates on cash ISAs used to be higher than non-ISAs, so it was a no brainer to choose ISAs. But that isn't the case any more.

I don’t get any personal savings allowance so I use my ISA allowance every year.

What I didn’t know until fairly recently was that if you are not working then your entire income tax personal allowance can be used for savings interest. My DH is currently a SAHD so we have almost all our savings in his name, he pays no tax on the interest, and the rates are better on most non-ISAs. We do have one ISA but more of our savings are elsewhere. If he does start working again at some point then we’ll put more in ISAs.

I have a cash ISA and a stock and share ISA. Definitely not enough to beat the £1000 but it’s much simpler and if you don’t have a lot of money then the difference isn’t going to be great anyway

@Squidgemoon yes and as part of that I've recently found out that there is another cliff edge

So if you're in that bracket and you look at doing some bits and pieces of work, you lose something called starter rate for savings? I didn't know it existed.

But it's another stupid cliff edge which might affect me if I do bits and pieces of work

@SpryNavyHelper honestly I think people may not be thinking about it much

Obviously, if the rates aren't as good then that's different but being able to build up money that's protected from tax in theory forever is important

Trends have changed, I suppose
When I was young, it was certainly seen as priority to use your tax-free wrapper first, but I can't remember what the situation was with rates on paying tax on saving

Oh yeah fair enough. Sorry - my comprehension was more an issue than your post!