Lloyds Bank launches new Isa deal with huge interest rates for savers

An extra 0.05 per cent rate is added for those who already have a personal bank account with Lloyds, as long as it was opened at least 40 days ago.

The new deals mean anyone saving £10,000 in the Lloyds one-year deal will earn £495 in interest, while the two-year fix will bag a £1,025 return over the 24 month period.

To open either account, savers will need a minimum £3,000 deposit and it can be opened and managed online, over the phone or by visiting a branch.

Savers can choose to have their interest paid monthly or annually.

People with cash Isas elsewhere can also transfer to Lloyds and receive interest on their cash Isa while Isa funds are being transferred, provided they are free to move.

To transfer from a cash Isa, they'll need the sort code and account number.

Like most fixed cash Isa deals there are charges if someone decides to withdraw money early from the Lloyds deals.

Savers will be charged the equivalent of 180 days' tax-free interest when making withdrawals, closing their account early or transferring money to another Isa.

At the end of the fixed term period, the account will change to an Instant Cash Isa.

Lloyds is currently only paying between 0.9 per cent and 1.5 per cent on this account, so people will need to switch when this time comes.

The personal savings allowance allows £1,000 a year of interest to be earned for basic rate taxpayers and £500 for higher rate taxpayers, before being taxed.

As rates are now higher, millions of savers are likely to face a tax bill on their regular savings.

Therefore a basic-rate taxpayer earning five per cent interest, having more than £20,000 in savings will tick them over the PSA - and for a higher-rate taxpayer, that figure is £10,000.