39 million adults set to miss tax-free ISA deadline
With less than two weeks until the new tax year, 39 million UK adults could be set to miss out on the deadline to use their tax-free ISA allowance.
New figures reveal just a third (34 per cent) understood the tax benefits of ISAs, up from a quarter (27 per cent) in 2019.
This year, only 29 per cent knew that ISAs could be an investment, not just a savings tool, while just 14 per cent knew which provider to turn to in order to open different product types, cash, stocks and shares, lifetime and Innovative Finance, according to research by CapitalRise and 3Gem earlier this month.
ISA account holders can save or invest up to £20,000 tax-free every tax year (6 April – 5 April), keeping the full amount in one type of ISA or split across different products.
Last week the chancellor confirmed in the Spring Budget that these limits would remain in place.
In contrast, interest generated from non-ISA savings accounts is subject to tax. Basic rate taxpayers can earn up to £1,000 of tax-free interest each year, higher-rate taxpayers get a £500 allowance, and additional rate taxpayers do not get an allowance. This is called a personal savings allowance.
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CapitalRise’s survey of 2,000 UK adults also revealed that investing is growing in popularity. It found 61 per cent of people surveyed hold some form of investment, up from 34 per cent in 2019.
While some have been attracted to investing by salaries failing to keep pace with inflation, others have been drawn by rising interest rates and returns.
Despite this increasing popularity though, ISAs remain highly underutilised as both a saving and investment tool.
Almost half (46 per cent) of respondents reported that they did not put any money into ISAs this tax year. This equates to roughly 39 million people when applying the findings to the wider population, based on data from the Office for National Statistics.
Those that did utilise ISAs deposited large sums, with 24 per cent confirming that they used their full ISA tax-free allowance this tax year.
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“It is important to do your due diligence, as there are several types of product that all work differently,” said CapitalRise chief executive and co-founder Uma Rajah.
“CapitalRise offers an Innovative Finance ISA (IFISA) that invests funds in loans to developers, which are then used to support prime property projects in areas such as Mayfair and Chelsea. At CapitalRise, we are seeing strong demand for our IFISA product, including an uptick in the number of people transferring in from other ISA providers. This demand is mirrored in today’s findings which show that almost two-thirds of people hold some form of investment, up from just a third four years ago.”
She added: “At times like these, it is especially important to check your money is working as hard as it can for you. ISAs are a tax-efficient way of building savings and investments, but with today’s findings showing a significant portion of the population is unaware of the key benefits and differences between the ISA types, it is clear that they hold huge untapped potential.”
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