74% don't know Isa allowance limits
With the end of the tax year now just a month away, new research from Santander has revealed three-quarters of Brits are still unaware of how much they can save in a tax-free Isa.
Despite the amount savers can put away increasing from £5,760 to £15,000 last July - and rising to £15,240 from 5 April - 74% of Brits, or 37.4 million people, admit to not knowing what the limits are.
Around 8% of people plan to put away the full £15,000 in cash, with the average amount savers expect to deposit this tax year standing at £4,210 - 28% of the allowance. Overall, savers have an average of £10,054 in an Isa.
However, there was more positive news when it comes to those savers who are aware of the changes. A fifth (18%) of people said they were now saving more as a result of the higher allowance, another 18% said they were using their Isa account to save more, while 10% said they are now shopping around to find a competitive rate of interest. Around 2.5 million (18%) added they were planning on opening an Isa for the first time before the April deadline too.
Know your limits
Helen Bierton, head of savings at Santander said: "While it's encouraging to see people saving more since the Isa allowance increased last year, it's really important that people are aware of the new higher allowance.
"Now is the time for savers to look to make use of their Isa allowances to ensure they take advantage of the tax-free interest available to them and are not paying tax on savings unnecessarily. It's worth planning ahead this year, as the tax year end also falls over the Easter weekend."
There are limits to how much you can invest in any tax year. For 2011/12, the limit is £10,680. Of that, the maximum you can invest in cash is £5,340 and the balance of £5,340 can be invested in shares (individual company shares or investment funds). If you don’t take the cash ISA allowance, you can invest up to £10,680 into a stocks and shares ISA.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.