Most Brits don't understand tax on savings

Tax on coins

Nearly two thirds (63%) of Brits don't realise basic-rate taxpayers pay 20% on any interest earned from standard savings accounts straight to HMRC.

One in seven mistakenly think a basic-rate taxpayer pays no tax on a standard savings account at all, while 12% think they would have to pay tax on cash Isa savings.

In fact, more than a third (37%) didn't realise there's no tax to pay on interest earned in an Isa.

More men than women were aware of savings tax, at 43% compared to 32%. And unsurprisingly, knowledge increases with age. Six out of 10 18-24 year olds didn't know about cash Isa savings being, while 72% of over-55s did.  

Lack of understanding

Darren Bailey, at Nationwide Building Society, which put together the numbers, said: "This lack of understanding that interest is tax-free in an Isa but not on a standard savings account could mean many savers are giving more money to the taxman than they need to."

He added: "Nobody likes paying more tax than they need to, so savers should ensure they fully utilise their Isa allowance before opting for a standard savings account."

Up until 5 April 2014, £5,760 can be deposited into a cash Isa, and £11,520 in a stocks and shares Isa.

From 6 April to the end of June those figures rise to £5,940 and £11,880 respectively.

And from 1 July, up to £15,000 can be paid into the single merged account called a ‘new Isa' or Nisa, with savers able to decide how much to hold in cash or invest in stocks and shares.

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