Nationwide offers new interest rates across fixed accounts - but Brits warned watch out for savings trap

The Building Society's latest offerings include a one-year Fixed Rate Cash ISA paying 4.10 per cent AER tax-free.

Savers can also access one-year Fixed Rate Online Bonds and Branch Bonds, both paying four per cent AER.

Customers can open the Online Bonds through Nationwide's website, Internet Bank and Banking app, while Branch Bonds are exclusively available in-branch.

The Fixed Rate Cash ISAs offer additional flexibility, accepting transfers from existing ISAs and can be opened through multiple channels including the website, banking app or in branch.

These new products replace all previous Fixed Rate Online Bonds, Branch Bonds and ISAs, which were withdrawn from sale on October 23. There is no change for existing customers who took out a bond or fixed-rate ISA prior to October 24.

Following Nationwide's new cash ISA rates, Moneybox has raised the stakes with a market-leading easy-access Cash ISA rate of 5.17 per cent.

The Moneybox deal includes a 0.45 per cent bonus for the first 12 months and requires a minimum deposit of £500.

Caitlyn Eastell, spokesperson at Moneyfactscompare.co.uk, said: "The deal maintains the market-leading position when compared against its peers.

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"It now pays an attractive 5.17 per cent, which includes a bonus of 0.45 per cent for the first 12 months, so savers would be wise to review after this period."

However, the account comes with some restrictions, allowing only three withdrawals per calendar year before a lower rate applies.

Close competition comes from Trading 212's easy access Cash ISA, offering 5.15 per cent AER with no minimum deposit and unlimited withdrawals.

Plum follows with a 4.92 per cent AER Cash ISA on deposits over £100, though it also limits withdrawals to three per year.

With savings rates at their highest levels in years, savers are increasingly at risk of falling into tax traps due to frozen income tax thresholds.

The issue particularly affects those earning over £50,270, who see their personal savings allowance reduced from £1,000 to £500 when they become higher-rate taxpayers.

These higher-rate taxpayers will lose 40 per cent to tax on any interest earned above £500 per year. Additional rate taxpayers face an even tougher situation, receiving no personal savings allowance at all.

Victor Trokoudes, chief executive of Plum, said: "High interest, coupled with many people moving into a higher tax bracket, means tax on savings is becoming more of an issue."

"This isn't right – everyday savers shouldn't have to lose out on the tax front just because they want their money to be accessible in cash."

To avoid falling into savings tax traps, experts recommend utilising ISAs which offer complete protection from tax on interest.

ISAs allow savers to protect up to £20,000 each tax year from tax on interest, dividends or capital gains. Savers should actively seek the best ISA rates, as high street banks typically offer lower returns between 0.5 and 3.9 per cent.