With people having to work until the middle of the year to reach Tax Freedom Day, ISAs have become the method of choice for keeping any more funds out of the taxman's reach.
Tax Freedom Day – the date at which the average UK taxpayer has fulfilled their tax obligations for the year and begins earning money for themselves – was on 30 May this year.
And research from F&C Investments shows that people are looking to ISAs to ensure that the taxman doesn't get his hands on any more of their money.
Some 53.3% of respondents said they use all or part of their Individual Savings Account (ISA) allowance each year as part of an effort to make their investments more tax efficient.
The ISA allowance in 2011/12 is £10,680, giving individuals the opportunity to invest quite a substantial sum and enjoy tax free returns.
A further 40% said they used both ISAs and pensions.
While returns from pensions are taxable, they benefit from upfront tax relief, which is of particular benefit to higher and top-rate taxpayers, who can see their net pension investments boosted by 40% or 50% respectively.
"Many people would find it a little shocking to think that every penny they earn in the first five months of the year goes straight to the Government," said Mike Woodward, head of investment trusts at F&C Investments.
"Happily, there are many ways for investors to avoid handing over any more of their hard-earned cash to the taxman."
There are a number of competitive ISA products on the market at present for those who want to keep the taxman away from their interest.
Savers keen to lock their money in for a year can get a rate of 3.10% with Nationwide's e-ISA which is operated online.
Those looking for a higher rate can commit their funds for two years in return for a rate of 3.70% with Chelsea BS's e-ISA account.
For a full run down of the savings market's finest cash ISAs, as well as stocks and shares ISAs, check the Moneyfacts Best Buy tables.
Looking for a Cash ISA - Compare cash isa rates and best isa rates for transfers Request a FREE ISA Savings brochure now
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 Any products featured may be withdrawn by their provider or changed at any time.
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