The majority of Britons are losing out on up to £20,000 in tax-free savings allowance due to a “lack of disposable income” according to a new poll by investment platform Easymoney.
Experts are warning that the British public are not taking advantage of ISAs, savings accounts which allow individuals to save up to a certain amount without paying tax.
There are multiple types of ISAs, including Lifetime ISAs and Cash ISAs, but each saver has a £20,000 tax-free allowance they can use every year.
Despite this, Easymoney found only 39 per cent of Britons took advantage of this allowance with 57 per cent unaware of the recently announced British ISA.
During the Spring Budget, Chancellor Jeremy Hunt confirmed the new savings product which will allow an additional £5,000 of tax-free investment into UK equities.
A set date for the type of savings account has yet to be announced but is expected to be rolled out by April 2025.
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Britons are choosing not to save their money in ISAs, according to a new poll
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In a survey of 1,079 British citizens, 61 per cent of people in the UK put no money whatsoever into an ISA during the last tax year.
However, 23 per cent did choose to invest some money into an ISA, while just 16 per cent report to have invested the maximum amount of £20,000.
Out of those who did not maximise their ISA allowance in 2023, most admitted it was because they lacked the disposable income required to do.
Experts cited this is a likely consequence of the ongoing cost of living crisis which is hampering peoples’ ability to save for the future.
With the rise in cost of living in mind, three-quarters of those polled said they have no intention to utilise their full ISA allowance in this new financial year that’s just started.
On top of this, 83 per cent once again reported that it’s due to a lack of disposable income.
Due to the impact of inflation, the Bank of England has opted to raise the base rate to 5.25 per cent with interest rates remaining at this level since August 2023.
This has been passed onto savings accounts by banks and building societies with customers opting for high interest accounts than tax-free ISAs.
Even when told about the coming British ISA, 81 per cent of respondents shared that they have little intention to take advantage of it.
Jason Ferrando, the CEO of easyMoney, warned that this suggests a “slim uptake” in the product with wider interest in ISAs unlikely to improve.
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He explained: “ISA investment is a great way for people with all sorts of levels of wealth to make their money work for them, but for most people nowadays, disposable income is really hard to come by.
“And at times like this, investing and saving is very much a luxury, so it’s little surprise to see many people tuned out of the ISA investment world.
“The launch of the British ISA demonstrated just how far the profile of ISA investment has come in a few short years and not only is the additional tax-free allowance great news for investors, but further diversification of the ISA offering is also a positive.
“However, it seems as though the uptake will be initially slim, with the majority of savers opting not to utilise this product when it is launched.”
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