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Don’t give a gift to the taxman

Don’t give a gift to the taxman

Category: Savings

Updated: 04/04/2011
First Published: 05/10/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

When it comes to savings, many of us are handing money straight over to the taxman.

Despite the fact that nine out of ten Brits are saving, it seems that many people are not taking advantage of the tax-free haven found in an ISA, according to Fidelity Investment Managers.

A shocking 42% have admitted to overlooking their yearly ISA allowance.

Putting your money into an ISA account is one of the few legal ways to avoid paying tax.

Within a cash ISA, £5,100 can be invested per annum, whilst an additional £5,100 can be invested in a stocks and shares ISA. This means that every year you could save £10,200 that the taxman could not touch.

"ISAs are a year-round investment and shouldn't just be considered at the beginning or end of the tax year," said Tom Stevenson, investment director at Fidelity Investment Managers.

"Last year we saw unprecedented levels of ISA investments in October, generated by the increased allowance for over 50's. It is disappointing to see that the same interest will probably not be repeated this year, and that people are simply not making the most of their ISA.

"Despite the fact that many millions of people do contribute to ISAs, many millions more are missing out and unnecessarily handing over their hard earned money to the taxman.

"ISAs are a fantastic use-it-or-lose-it tax perk - no further tax to pay ever, and a generous £20,400 allowance for a couple, but no way back if you let the tax year pass without taking up your allowance."

If you're keen to keep your investments at arm's reach from the taxman, the Moneyfacts.co.uk Best Buy tables are your one-stop-shop for the best tax efficient savings account currently available.

They include the Cash ISA Direct Reward from Halifax, offering clients a top rate of 2.80%.

The rate alone should be enough to catch the eye of savvy savers, but Halifax has improved it service by unveiling the 'Cash ISA Promise.'

Effective from 2 October 2010, it aims to make the cash ISA transfer system more transparent for customers.

The first bank to offer such a promise, Halifax is offering customers instant interest on cash ISA transfers and other institutions are likely to follow.

The cash ISA promise includes several other benefits: Halifax cash ISAs will be available to both new and existing customers and the interest rate will be clearly stated on ISA statements and online.

In addition, Halifax cash ISA customers will receive advanced notice when any reward or fixed rate period is due to end.

Other popular ISAs available at the moment include the Northern Rock ISA Breaker, which pays a rate of 3.00%, the Barclays Golden Cash ISA Issue 2 that pays 2.08%, and the Santander Direct ISA that pays 2.75% on deposits of £9,000 or more.

Find the best savings account for you - Compare cash ISAs

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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