Savers lose £153m of tax free interest every year

Halifax estimates that UK savers missed out on tax free interest of £153 million in the past year by not ‘maxing out’ their ISAs before the end of the current tax year with funds already available in their instant access or personal current accounts.

Over three-quarters of these balances are held by customers who have as yet not utilised any of their 2014/15 ISA allowance. The average Cash ISA balance of £5,241 in February 2015, equates to an average shortfall of £9,759 per customer.

Despite the Government increasing the allowance by 153% in July 2014, the average cash ISA balance grew by just 7% in the year to February 2015 to £5,241 from £4,916.

The average cash ISA balance in Britain is equivalent to a quarter (24%) of national average disposable annual earnings of £21,813.

Regionally, the highest average balance is held by savers in East Anglia (£5,577) and the lowest is in the North (£4,499); a difference of 21%. However, all regions have seen an increase in average balances in the year to February 2015. The largest rise was in the South West where average ISA balance rose by 9% to £5,067, followed by London (8% to £5,381) and the North (8% to £4,936).

Matt Bartle, Halifax Savings said:

“With savers collectively missing out on tax free interest totalling £153 million, those who have funds in taxable instant access accounts should consider transferring to make the most of their tax free ISA accounts.

“Currently, consumers get limited opportunity to protect their savings from tax. Savers need to make every effort to maximise the benefit that tax free savings provide both now and after the changes announced in the budget are implemented.”