I am aware of the £1,000 Personal Savings Allowance, adding this to the equation confuses me even more.
So which one would be more beneficial at the end of the year, consistently adding £1,500 every month?
It depends on the conditions of your ISA account (and, assuming it is a Cash ISA, its AER%). It also depends on you financial situation.
With the ISA, you can save up to 20000£/year, and keep it tax-sheltered for an indefinite amount of time. 12*1500£ = 18000£, so you can definitely include everything you are currently saving inside.
The 0.35% savings account will net you roughly 9000£ * 0.0035 = 31.5£ which is way below the £1000 threshold of the PSA.
If you opt for the savings account, you can - in practice - forget about taxes, because the amount of interest generated is quite small anyway.
However, it is very likely that you'll keep saving for more than a year. In that case you should go for an ISA, because that way you can keep sheltered more and more savings over time. This could be specially important if in the future interest rates raise significantly, or if you decide to switch for a different kind of ISA account (e.g. a Stock & Shares ISA)
The rule is very simple.
Always, always, always make use of your tax wrappers (i.e. ISA & SIPP) before anything else.
Remember that tax wrappers operate on a "use it or loose it" basis,i.e. if you don't use it in a particular tax year, you cannot roll it over to the next, its lost forever. That is why it is so incredibly important to use them before anything else.
Also remember wrappers are for life. So its NOT a question of "which would be better at the end of the year", that is absolutely not the correct way to look at it. It is a question of the long-term benefits of putting in a wrapper.