Tax relief accounts are not utilised to best effect by people trying to save cash.
British savers are confused about ISAs and failing to take advantage of tax reliefs, according to a Nationwide Building Society survey.
The study of 1324 adults showed that 95% of consumers do not know what their full ISA allowance will be for the next tax year and over a quarter of participants do not think there is a limit on how much cash they can pay into an ISA each year.
Just over 25% of people do not plan to use any of their annual cash allowance of £5,100 in the next year and almost 40% believe that they have to pay tax on the interest earned on any money that is placed in an ISA.
The survey also found that more than half of consumers do not have a cash ISA and 79% do not hold a stocks and shares ISA.
Robin Bailey, Nationwide’s director for savings and investments, said: “Our research shows that there is still a great deal of confusion and misunderstanding around ISAs, and that people are still not taking full advantage of the tax breaks that they offer. We estimate that cash ISAs alone are saving consumers over £680 million in tax a year – clearly a substantial saving”.
“What’s more, few people are aking advantage of their ISA tax relief by utilising their stocks and shares ISA allowance, and are therefore missing out on the potential for even greater growth on their investments. A better understanding of ISAs could help consumers make more of their annual allowance, helping put more money into the hands of savers and investors”.
He added: “The low Bank of England base rate environment has meant that savers need to keep a close eye on the rate they get from their savings provider. Yet over half do not know the rate they are getting”.