Savers warned to ‘Use it or lose it’
Approximately £225m could be lost to taxes if people fail to top up their individual savings accounts (ISAs) over the next month, Nationwide Building Society has estimated.
The current tax year will end on 5 April, at which point savers and investors will have lost the chance to take full advantage of their tax-free allowance, if they haven’t hit their yearly ISA limit already. Those that fail to use their full allowance risk paying more than £225m extra in tax during the current financial year, according to Nationwide.
Research from the building society also showed that only a third of the UK adult population currently hold an ISA and many fail to top up their account on a yearly basis. The research also revealed that if those who do not currently hold an ISA were to maintain a £3,000 balance in a different type of savings account paying 5.25%, £1bn would be paid in unnecessary taxes this year.
Matthew Carter, savings director at Nationwide, said: “With only a month remaining in the current tax year, people should make sure they are taking advantage of the tax-efficient savings on offer by using all of this year’s ISA allowance. Any part of their allowance remaining unused by 5 April will be lost forever. Millions of people fail to do this each year and are simply allowing their hard-earned money to line the Chancellor’s coffers.”
Savers can currently invest up to £7,000 in ISAs each tax year. This can be in one maxi ISA or two mini ISAs. Savers can hold all £7,000 in stocks and shares through a maxi ISA, or up to £3,000 in cash and the balance in stocks and shares. Mini ISAs allow an investment of £4,000 in stocks and shares and up to £3,000 in cash.
On 6 April 2008, new ISA rules will come into effect – the mini/maxi distinction will be removed and people will be able to save up to £3,600 in a cash ISA and up to £7,200 in a stocks and shares ISA, with an overall savings limit of £7,200.