Brits pay too much tax on savings worth £85bn

The figures from the Office of National Statistics show more than five million adults pay tax on their savings accounts yet don’t have any cash or investments in a tax-efficient Individual Savings Account. The average savings account balance is £13,175 – well within the £15,000 limit for New ISA contributions this tax year alone.

To compound the potential tax bills, statistics show more than 1.2 million investors own company shares but don’t have a stocks and shares ISA to make their investment more tax efficient. New ISAs, introduced in July 2014, can be made up of cash or stocks and shares or any combination of the two.

The limit on how much can be saved or invested in an ISA is £15,000 per person per tax year. That’s a £30,000 allowance for a married couple. There are a few weeks left to make the most of this year’s allowance; from April 6 you can invest in another New ISA and the limit will rise to £15,240.

Married couples could invest up to £60,480 between them in tax-efficient ISAs over the next couple of months.

Further analysis of ONS data by NFU Mutual showed fewer than half of UK adults (46.8%) have an ISA with Northern Ireland and the North East having the lowest levels of tax-efficient saving and investment.

Nationwide, barely 15% of savers have at least this year’s New ISA limit of £15,000 saved or invested. The average amount ISA savers have amassed tax-efficiently is £16,490.

Sean McCann, chartered financial planner at NFU Mutual, said:

“If you have savings and investments but no ISA, it means you’re probably losing out. Putting money in an ISA is one of the simplest things to do to help protect your money from the taxman.”

“Although a significant number of people will have no spare money to save or invest, it’s likely many of the rest will be paying tax unnecessarily on their nest eggs."