Nationwide estimates that, during the current tax year (2007-08), savers in the UK could be paying more than £230 million extra in tax by failing to take advantage of their yearly ISA allowance.
As the tax year draws to a close, Nationwide Building Society is urging people to take full advantage of their annual ISA allowance and avoid missing out on tax-efficient returns on their savings. Only a third of the UK adult population currently hold an ISA and many of these fail to top up their account on a yearly basis.
Nationwide estimates that for the tax year 2007/08:
If this total underfunding of £20.5 billion were to be invested in a non-ISA savings product paying a gross rate of 5.50%, an estimated £230 million could be paid to the taxman unnecessarily in the current tax year. Furthermore, if those who do not currently hold an ISA were to have a balance of £3,000 in a non-ISA savings account paying 5.50% interest, a further £1 billion would be paid unnecessarily to the taxman this financial year.
Matthew Carter, Nationwide's savings director, said: "With the ISA season soon to be drawing to a close, people should make sure they are taking advantage of the tax-efficient savings on offer by using all of this year's ISA allowance. Any part of their allowance remaining unused by 5 April will be lost forever. Millions of people fail to do this each year and are simply allowing their hard-earned money to line the Chancellor's coffers.
"Nationwide offers free expert advice to anyone who wants to find out more about ISAs. We have a range of very competitively priced cash ISAs, as well as stocks and shares ISAs with a range of investment options."
From Tuesday 5 February, Nationwide will be offering stocks and shares ISA customers an Ethical Trust from Legal & General to complement its existing offers. This Trust enables members to invest in a portfolio of companies in the FTSE 350 index which meet a range of ethical and environmental guidelines, and is a new addition to a range of funds designed for people with differing attitudes to risk.
Currently, savers can invest up to £7,000 in ISAs each tax year. This can be in one maxi ISA or two mini ISAs. In a maxi ISA people can hold all £7,000 in stocks and shares or up to £3,000 in cash and the balance in stocks and shares. In mini ISAs people can hold up to £4,000 in stocks and shares and up to £3,000 in cash. With effect from 6 April 2008, new ISA rules7 will come into force, removing the mini/maxi distinction and allowing people to save up to £3,600 in a cash ISA and up to £7,200 in a stocks and shares ISA, within an overall savings limit of £7,200. Nationwide would like to see people make full use of their increased ISA allowance in the new tax year and enjoy the tax-efficient benefits of this savings vehicle.
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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