Savers unnecessarily lose £100 million to the tax man this year

In the current tax year (2008-2009), it is estimated by Nationwide Building Society that around £100 million unnecessary tax will be paid by savers who have failed to take full advantage of their annual Individual Savings Account (ISA) allowance.

The current ISA rules allow people to save up to £3,600 in a cash ISA, with the balancing amount up to £7,200 in a stocks and shares ISA. The overall ISA annual savings limit is £7,200. Savers have until 5 April 2009 to top-up their ISAs for the current tax year. Given the current economic conditions, setting money aside has never been more important and Nationwide encourages all savers to make the most of their tax-efficient allowance before the end of the tax year. Data from the Society's savings barometer reveals nearly a quarter (23%) of consumers save nothing at all, meaning even more ISA allowances are left untouched.

Only a third of the UK adult population currently holds a cash ISA and many of these account holders do not top up their ISA on a yearly basis. This tax year alone, Nationwide estimates that cash ISA holders could fail to top up their accounts by approximately £12 billion. By saving this £12 billion in non-ISA savings products paying a gross rate of 3.75%, an estimated £100 million could be paid to the tax man unnecessarily in the current year.

Andy McQueen, Nationwide's savings and mortgages director, said: "The end of the current tax year is fast approaching which means there's not much time left for consumers to make use of their ISA allowance. If appropriate, one way consumers can make good use of the ISA allowance is to take advantage of the fixed rate ISA products available. Nationwide offers a choice of products paying up to 3.25 per cent with one, two and three year terms to meet the different needs of savers.

"As a mutual organisation, Nationwide is committed to providing a range of cash and stocks and shares ISA products to help kick-start people's savings habits. We understand that, as household finances are stretched, saving can be a challenge but it's never been more important to build up savings to act as a buffer in uncertain times."