As the 07/08 tax year draws to a close we Brits are still not getting the 'ISA' message.
Far from rushing to take advantage of the tax free savings opportunities ISAs provide, we Brits are still dragging our feet.
Only 1/3 of the British tax paying population currently hold an Individual Savings Account* despite over 2/3 having £1,000 or more stashed in savings**. In real terms this means that up to £225million each year could be finding its way to the tax man unnecessarily*.
Even those that do pay into an ISA may not be getting the best return on their money as, according to Selftrade, over half of these go for the easy option and take out a mediocre ISA with their main bank rather than shopping around for the best return.
Findings reported by Halifax, the UK’s largest ISA provider, suggest that the reason behind our seemingly apathetic approach could simply be down to a lack of understanding.
In their survey, only 20% of those questioned knew how much they could save in a cash ISA while only 9% understood how the mini/maxi ISA distinction worked and what this meant for their tax free investment potential. What’s more, a rather astonishing 25% of those surveyed didn’t even know that an ISA is a type of savings account.
Add to this Nationwide’s findings that over 18% of the population aren’t aware that instant-access mini cash ISAs are available and you can begin to understand why ISA investment rates are so low.
Speaking about the issue, Halifax head of savings, Tony Wilcox, commented: "ISAs have been part of the savings landscape since 1999, so it may come as a surprise that almost 80% of people do not know their annual cash ISA allowance. We would urge everyone to use their annual ISA allowance to ensure they reap the benefits of tax-free savings."
While it’s currently possible to invest up to £7,000 a year in Individual Savings Accounts, with up to £3,000 of this saved as cash, as of April 6th the ISA allowance increases to £7,200 a year with a raised £3,600 cash maximum. Additionally, in an attempt to make these accounts more accessible to the public, the mini/maxi ISA distinction is being removed.
*Research by the Nationwide
**Research by the Yorkshire Building Society
