Tax-free interest warning as ISA deadline nears - Savings - News - Moneyfacts

News

Moneyfacts.co.uk News brings you the latest financial & economic news & reviews of the best products in the UK by our team of money experts.

Tax-free interest warning as ISA deadline nears

Tax-free interest warning as ISA deadline nears

Category: Savings

Updated: 02/04/2012
First Published: 02/04/2012

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 It is now over 6 months old so the content may be out of date.

Savers have been warned they could be missing out on as much as £242 million of tax-free interest because they leave spare cash sitting in their current accounts rather than putting it into an ISA.

In a typical month, the average cash ISA holder has £498 left over in their current account as the next payday arrives, according to Santander Savings.

Yet despite being in a position to enjoy a tax-free return on this money, only 17% will take full advantage of this year's £5,340 cash ISA allowance.

"Maximising the return on spare cash is important and taking advantage of tax-free interest via a cash ISA is a great place to start," said Matt Hall, head of savings at Santander.

"With only a few days to go to the end of the tax year, I'd urge savers to make use of their ISA allowance immediately as any unused allowance is lost forever."

Meanwhile, anyone with a cash ISA that includes a bonus rate which is set to come to an end has been urged to move their money to a better rate account.

Based on the current cash ISA limit of £5,340, Which? estimates those people who do not switch accounts once the bonus period expires will lose an average of £85 in the coming year.

The consumer watchdog said there are some clear incentives to switching as many banks have increased their top paying interest rates for 2012.

However, before transferring, consumers have been urged to compare cash ISA accounts and work out which provider will offer them the best rate.

If the best-paying accounts come with a big bonus, savers should then note when the bonus expires and switch before their interest rate, and potential earnings, drop.

For anyone who has still not made use of their 2011/12 ISA allowance, the 5 April deadline is fast approaching.

"If there's only one thing that people do about their finances this week, it should be to look at whether they would be better off by moving their money to a new account," said Which? executive director, Richard Lloyd.

Download our free Beginner's Guide to ISAs to find out how to use your 2011/12 ISA allowance. You will need a PDF reader such as Adobe Reader to download this guide.

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.

Related Articles

Just 44 savings accounts beat inflation

Inflation recorded another large jump during December, and predictably, this has had a devastating impact on the number of savings accounts that beat it, so much so that you’ll need to lock your money away if you want an inflation-beating return.

Just 47% have money in a savings account

We’re often told of the importance of saving, yet unfortunately, the message doesn’t always get through. Indeed, research shows that just 47% of those surveyed have money in a savings account, and 17% have no savings or investment whatsoever.

How much will you save this year?

Many of us have set savings goals for the year ahead, and planning to budget better and save more will be at the top of many financial resolution lists. But how much are you hoping to squirrel away? Encouragingly, many people have impressive targets.
 
Close