ISA savers who have not taken full advantage of their allowance have paid an estimated £13billion extra in tax since ISAs were launched more than a decade ago, Clydesdale & Yorkshire banks have claimed.
Since their introduction in 1999, savers have used only one sixth of their ISA entitlement – around £350billion, which according to the two banks has resulted in millions of pounds being given to the tax man.
As the majority of UK taxpayers have a 20 per cent tax liability on investment earnings, while a small proportion pay up to 40 per cent, Clydesdale and Yorkshire suggest that the tax benefit on the total ISA allowance available has totalled £15billion. However, it is has been calculated that only £2.3billion has been received since only one sixth of the total ISA allowance has been used.
On average, savers have invested around £2,500 each year, while it has also been revealed that a typical saver is saving less now than when ISAs were first launched.
According to the findings, by failing to use their full ISA allowance, savers have on average missed out on over £1billion of tax benefit every year.
However, with the ISA entitlement increasing to £10,200 from the new tax year, Clydesdale and Yorkshire are predicting that this figure could increase to £1.7billion.
Commenting, Steve Reid, retail director at Clydesdale Bank, suggests an ISA should "form the basis" of any taxpayer's savings portfolio.
"By not taking advantage of these tax-free accounts UK savers have potentially lost billions of pounds in tax they need not have incurred.
"With the new, higher allowances from April, the advantages of ISAs are even greater. Savers really should not miss out on these allowances. Even if every taxpayer only used their full cash allowance from 5th April, the total saved in ISAs would rise next year by 45 per cent, meaning they paid almost a billion pounds less in tax," he said.
© Fair Investment Company Ltd
