The new tax year is just about here, and so is the new ISA limit of £20,000. But will you be taking advantage? According to research from Barclays, many people won't be, with 39% of people not currently having any type of ISA – and they have no intention of opening one before the current tax year comes to an end at midnight tonight.
There could be various reasons for that, with 41% of those who don't currently have a cash ISA saying it's because they didn't have enough disposable income to squirrel away, while 17% had other financial commitments. However, lack of awareness could also be a barrier, with one in 10 saying they thought they wouldn't be able to access their savings, despite some ISAs offering flexibility.
Confusion is even greater when it comes to investment ISAs, as of the 76% who don't have or plan to open such an account, 34% admitted they didn't understand them, 37% didn't think investment ISAs were aimed at people like them, and 33% again felt that they didn't have enough disposable income to use in this way. Overall, 89% of respondents didn't even know the annual ISA allowance for 2017/18, further highlighting that better communication could be necessary.
"In the current low interest rate environment, we appreciate that it is not always easy for people to grow their nest egg," said Sue Hayes at Barclays. "However, the increase in the annual ISA allowance to £20,000 for the 2017/18 tax year is a great opportunity for people looking to shelter even more of their savings from tax. With a little research, you could uncover savings opportunities that make a real difference."
However, even if a great deal can be found, concerns about disposable income remain – and these kinds of concerns could become even more pressing in the year ahead. Barclays' research found that 64% are concerned about the impact of rising inflation on their savings, a finding mirrored by Scottish Friendly, whose latest Disposable Income Index shows that 70% are worried about the impact inflation will have on their disposable income in the next 12 months.
As a result, 46% of households are planning to cut back on spending, with 53% of those saying they need extra money to cope with the cost of day-to-day living, and 21% hoping to pay down existing debts.
They're looking a number of ways to do so: 67% intend to purchase cheaper groceries (67%), while 57% will spend less on leisure and going out, and 55% will spend less on treats such as coffees. A further 36% will look to get better deals on energy suppliers, while the same proportion are intending on going on cheaper holidays or not holidaying at all, and 14% will even look for a second job to meet any shortfall.
"Our latest index shows that around half of Brits are currently holding their breath and tightening their belts," said Calum Bennie, savings expert at Scottish Friendly. "They are expecting a bumpy ride, and those households are proactively taking steps to ensure they are prepared for any outcome. It seems as though they are learning lessons from previous generations in times of uncertainty and are embracing a thrifty approach to spending, or planning to find alternative ways to boost their income."
If you're lucky enough to be able to make extra savings, you still need to find the right place to put those funds. Having an extra financial buffer can be invaluable, particularly in such uncertain times, and if you want maximum tax-efficiency, you really can't go wrong with an ISA. Now could be a great time to get on the bandwagon, particularly with the new ISA allowance coming into force tomorrow, so start comparing cash ISAs to get a head start and see how much you could benefit.
Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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