Most Brits don't understand tax on savings

25 March 2014

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.

Find the best cash Isa or savings account for you

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