Cash ISA savers shelter an extra £5,500 from the taxman Go compare with our comparison table

Cash ISA savers shelter an extra £5,500 from the taxman

12 March 2010 / by Andy Davies

ISA savers who have taken full advantage of their cash ISA allowance every year since their launch could be up to £5,500 better off than savers who did not use their tax-free allowance, according to moneysupermarket.com.

The price comparison website has revealed that when compared to a saver using an instant access savings account paying tax on earnings, a standard rate tax payer could have earned an additional £2,900 in interest by using their full ISA allowance, while a higher tax payer could have sheltered up to £5,500 over the past 11 years.

In addition, anyone who has used their full cash ISA allowance since they were introduced in 1999 could now have a savings pot of more than £46,000.

Commenting, Kevin Mountford, head of banking at moneysupermarket.com said: "UK taxpayers who have managed to save in a cash ISA year after year since launch should be feeling pretty smug, and who can blame them! The tax free interest, particularly for higher tax rate payers is worth smiling about."

However, despite the cash ISA limit set to be increased from £3,600 to £5,100 from 6 April, 37 per cent of Brits have said they have no plans to make use of their additional tax free allowance, while a quarter confessed that they "could not be bothered" to save at all.

With interest rates remaining low, coupled with rising inflation threatening savers returns, the price comparison website suggests it is a "no brainer" for savers who are considering using their ISA entitlement.

"Consumers that can afford to save should be looking at ISAs, without doubt. Although rates are currently low, we have started to see some attractive offerings from the likes of Santander and Nationwide, and the benefits of these tax-efficient wrappers should not be overlooked," Mr Mountford said.

Encouraging savers to check how much they are earning on their existing ISAs and switch if necessary, he added: "Many older ISA accounts will have dropped rates significantly so transferring funds is essential; in most cases funds are transferable to their new ISA without losing the tax free status, although you do need to adhere to the ISA transfer rules."
   
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†† Income payments are dependent upon the FTSE 100 Index.

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