Savers set to lose out by not investing tax efficiently

Unbiased.co.uk's annual Tax Action Report reveals that savers are losing out on as much as £509 million by failing to put their savings and investments into tax-efficient savings accounts.  In a year that has seen consumers' savings suffer, in addition to an increasing squeeze on disposable income, people are still losing millions by not making the most of tax efficient wrappers such as ISAs and are instead investing their money into accounts which are subject to tax.

While circumstances may mean some people can't use their full ISA allowance, figures from the Tax Action report show a whopping £10,323 billion was missed out on last tax year by people failing to invest the maximum amount (£3,600) into a cash ISA.  Out of a possible £42.8 billion, Brits actually only invested £32.5 billion into cash ISAs last year.  Individuals also only invested a total of £12.5 billion into their stocks and shares ISAs when their allowance would have allowed them as much as £21.6 billion - resulting in an under investment of around £9 billion.

HMRC's figures show that only 15 million adults in the UK subscribed to an ISA during the 2009/2010 tax year, meaning that under a third of UK adults have invested in an ISA, with  millions still not using this tax-efficient way of saving.

5 April 2011 is the deadline for individuals to make the most of this year's ISA allowance; the annual limit (£5,100 for cash ISAs) for this tax year is a total of £10,200.  After this date, any unused 2010/2011 ISA allowance will be lost.  From the new tax year, which starts on 6 April 2011, savers can invest £10,680 in an ISA of which £5,340 can be in cash.

Karen Barrett, Chief Executive of unbiased.co.uk comments, "No matter how little you can save, putting away a small amount regularly each month in a tax-efficient savings account can make a big difference in the long-term.  However, especially in the current low interest rate environment, people should ensure they are making their savings work as hard as possible and by putting some basic tax planning in place such as investing in an ISA rather than a standard savings account, they could save even more.  Each new tax year means yet another opportunity to save tax-free.  Our research shows that with over £500 million set to be wasted this year, there are still far too many people that are not saving in a tax efficient way. 

"Investing in stocks and shares doesn't have to be daunting - if you are doing it for the first time then it's best to get advice to ensure you are choosing the right savings options for you.  An independent financial adviser can look at your finances as a whole and choose the best product and provider for your individual circumstances from all the products available.  To find a local IFA visit unbiased.co.uk and use our free and confidential ‘find an IFA' search."