Majority of savers not making most of tax-free savings accounts, reveals research

Wed, 22 Mar 2006

Almost three-quarters of UK savers are not taking advantage of their tax-free savings accounts, suggests a new report.

According to the Portman Building Society, 75 per cent of taxpayers could miss out on £3.56 billion worth of tax-free interest if they don't take out a cash Isa before the end of the tax year.

The building society calculated that one in five tax paying adults hold a cash Isa, which leaves a remaining 23 million taxpayers missing out on billions of tax-free interest.

Consumers who don't have an Isa but put money away into a different savings account are also missing out on interest rate savings.

According to Portman, standard rate taxpayers can earn double the interest on their savings in an ISA Isa, while higher rate taxpayers can earn three times the interest.

For instance, a basic rate tax payer can enjoy a 5.2 per cent rate of interest on their mini cash Isa, compared to the average interest rate in an instant access savings account which currently stands at 2.745 (gross) per cent.

"Tax paying savers are simply pouring money down the drain if they save in ordinary taxable accounts before using their Isa allowance," commented Matthew Wyles, group development director at Portman.

"Cash Isas are one of the most efficient, secure and simple ways to save. With just weeks to go before the end of the tax year, people are running out of time to lock in on one of the chancellor's few remaining tax breaks," he concluded.

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