Is it worth putting money into a cash Isa before the end of the tax year on April 6? You can stash up to £15,240 in a cash Isa in the current tax year and pay no tax on the interest. But some savers are beginning to question the value of cash Isas as banks and building societies cut rates. The introduction next month of the new £1000 personal savings allowance could further weaken the attraction of the tax-free accounts.

A cash Isa works like an ordinary savings account but the interest is tax free. In the past, the rates on cash Isas were often higher than the rates on standard accounts, but several banks and building societies have slashed the interest on cash Isas over the past few months, including Tesco Bank, Barclays Bank and Nationwide building society.

The average easy access Isa now pays 1.06per cent down from 1.11per cent in March last year, the lowest rate on record, according to Moneyfacts, the financial data firm. You can earn slightly more in a one-year fixed-rate Isa – an average of 1.33per cent compared with 1.45per cent in 2015.

Charlotte Nelson of Moneyfacts says: “At this time of year many providers start to vie for savers’ attention with some attractive new rates. But there have been more than 102 reductions to Isa rates since the start of the year and only 14 rate rises, making this perhaps one of the worst Isa seasons to date. Many savers are wondering whether it is even worth the hassle.”

The introduction of a new personal savings allowance in April could further diminish the appeal of cash Isas.

The allowance will allow basic-rate taxpayers to earn up to £1000 in interest tax-free each year. The allowance for higher-rate taxpayers is £500. Additional rate taxpayers are not entitled to a personal savings allowance. If you assume a typical interest rate of 1.5per cent, you could deposit £66,666 in a standard account before you reached the personal savings allowance of £1000.

Interest from any bank, building society, National Savings or credit union account, or investment bind counts towards the allowance, and any tax due will be collected by HMRC through your tax code. But Anthony Thomas at the Low Incomes Tax Reform Group said this week that the renamed ‘Savings Allowance’ would confuse people. He said: “We call on HMRC to ensure very clear guidance is made available and there is sufficient publicity to draw people’s attention to the changes.”

The group is also concerned that people will not know how to check their tax codes, to ensure HMRC has correctly calculated their likely savings income.

Some standard accounts already pay higher rates than cash Isas. For example, the top rate for a one-year fixed-rate Isa is 1.5per cent, available from both Aldermore and Virgin Money. But you can earn 2per cent in a standard one-year bond from Fidor Bank. If you are prepared to lock your money away for five years, the interest on State Bank of India’s cash Isa is 2.6per cent. The same bank pays interest of 3per cent on its standard five-year bond.

A basic-rate taxpayer would therefore be better off with a standard one-year bond from Fidor Bank than with a one-year fixed-rate Isa from Virgin Money.

Then there are high-interest current accounts that pay more than three times as much interest as an easy access Isa. For example, both Nationwide and TSB offer credit interest rates of 5per cent, compared with the best-buy easy access Isa from Virgin Money at 1.41per cent.

Just make sure you read the terms and the conditions. Kevin Mountford of MoneySuperMarket says: “Many of the higher in-credit rate current accounts require customers to meet a minimum funding amount or cap the balance for which interest is paid. Nationwide’s FlexDirect account, for example, pays 5per cent only on balances up to £2500.”

Experts therefore warn savers not to dismiss cash Isas completely. Nelson says: “Isas should not be overlooked, particularly if you are able to save up to the Isa limit each year, as the cash saved within the Isa will be tax free indefinitely.” In other words, there is no limit on the amount of tax-free interest you can earn in an Isa. The interest can add up, too. If you had invested the full allowance in Isas since their introduction in 1999 you would have earned interest of £163,320, according to figures from Hargreaves Lansdown.

The flexibility of Isas adds to their appeal. Savers can switch from cash to stocks and shares, and back again, without restriction or tax charge. And from April they will be able to withdraw and replace their savings within the same tax year without losing any of the Isa benefits – though not all banks and building societies have said they will allow this, and some will not.

Bear in mind, too, that income from an Isa does not have to be included on your tax return and does not count toward the threshold of £50,000 at which you start to pay the high income child benefit tax charge or the £100,000 threshold where you start to lose the personal allowance. Isa benefits can also be passed on to a spouse after death, whereas any money in an ordinary savings account would form part of your estate and could attract inheritance tax.