- Savers and investors have until 6th April to use or lose their ISA tax-free allowance
- Just a third (34%) of UK adults aware you can invest £20,000 in ISAs tax-free every year, up from 27% in 2019
With less than two weeks until the new tax year, new research has today revealed that 39 million UK adults could be set to miss out on the deadline to use their ISA tax-free allowance, which currently stands at £20,000 per person.
In a survey of 2,000 UK adults conducted by CapitalRise and 3Gem earlier this month, just a third (34%) understood the tax benefits of ISAs, up from a quarter (27%) in 2019 when CapitalRise conducted a comparable survey. This year, only 29% knew that ISAs could be an investment, not just a savings tool, while just 14% of respondents knew which provider to turn to in order to open different product types (Cash, Stocks and Shares, Lifetime and Innovative Finance).
Crucially, ISA account holders can save or invest up to £20,000 tax-free every tax year (6th April – 5th April), keeping the full amount in one type of ISA or split across different products. Just last week, the Chancellor of the Exchequer confirmed in the Spring Budget that these limits would remain in place.
In contrast, interest generated from non-ISA savings accounts is subject to tax. Basic Rate taxpayers can earn up to £1,000 of tax-free interest each year, Higher-Rate taxpayers get a £500 allowance, and Additional Rate taxpayers do not get an allowance. This is called a Personal Savings Allowance (PSA).
61% UK adults hold investments, up from 34% in 2019
CapitalRise’s data also reveals that investing is rapidly growing in popularity. The findings show that 61% of people surveyed hold some form of investment, up from just 34% in 2019. While some have been attracted to investing by salaries failing to keep pace with inflation, others will have been drawn by rising interest rates and returns.
Despite this increasing popularity though, ISAs remain highly underutilised as both a saving and investment tool. Almost half (46%) of respondents report that they did not put any money into ISAs this tax year. This equates to roughly 39 million people when applying the findings to the wider population, based on ONS data. Those that did utilise ISAs deposited large sums, with 24% confirming that they used their full ISA tax-free allowance this tax year according to the CapitalRise survey.
Uma Rajah, CEO and Co-Founder of CapitalRise, said:
“With the new tax year fast approaching on 6th April, time is running out to use this year’s tax-free ISA allowance. It is important to do your due diligence, as there are several types of product that all work differently. CapitalRise offers an Innovative Finance ISA (IFISA) that invests funds in loans to developers, which are then used to support prime property projects in areas such as Mayfair and Chelsea. At CapitalRise, we are seeing strong demand for our IFISA product, including an uptick in the number of people transferring in from other ISA providers. This demand is mirrored in today’s findings which show that almost two-thirds of people hold some form of investment, up from just a third four years ago.
“At times like these, it is especially important to check your money is working as hard as it can for you. ISAs are a tax-efficient way of building savings and investments, but with today’s findings showing a significant portion of the population is unaware of the key benefits and differences between the ISA types, it is clear that they hold huge untapped potential.”