ISA savers urged to use tax free allowance

Over 2.6 million UK savers who have previously taken advantage of the tax free status on cash ISAs could be missing out on £362 million pounds this year alone by not taking advantage of the new £5,100 cash ISA allowance available.

Research by moneysupermarket.com has found that of those who have previously saved into a cash ISA, over 15 per cent have not saved and do not intend to save anything this tax year; meaning they could be missing out on £138 additional tax free interest this year. Of those that are intending to save, over half (51 per cent) do not intend to use the full allowance.

Kevin Mountford, head of banking at moneysupermarket.com, commented: "It is sign of the times that many traditional ISA savers are deciding not to utilise their tax free allowance this year. The current economic uncertainty and rising cost of living is really putting pressure on many households' disposable income and unfortunately it is savings that tend to suffer when times are tough. However, it is important to try and put some money aside for a rainy day, which can tide you over should your circumstances change. Having at least three months of outgoings in savings is important and utilising your tax free allowance will ensure you are maximising the returns. More importantly, easy access cash ISAs allow you to immediately access your funds should you need them, which is an important consideration for many savers.

"For those that can afford to put away the full or even some of the £5,100 cash ISA limit, providers such as Birmingham Midshires and The AA are offering 2.7 per cent return on cash; over two per cent above base rate. Putting the full £5,100 allowance away this tax year would earn you just over £100 more than holding the equivalent savings in an average paying easy access savings account before tax."