Would anyone actively choose to pay tax on their hard-earned savings if they didn’t have to? You’ve probably heard about ISAs but according to Barclays, many Britons are failing to take advantage of the tax-efficient savings they offer. Surprisingly, research by Barclays last year* revealed that more than half of UK taxpayers have not taken advantage of this tax efficient way to save - even if they have cash in an instant access savings account or sitting around in a current account.
So if you’ve been looking for a new home for your savings, you might want to pop into your bank or call your financial advisor to take advantage of the latest ISA deals.
All you need to know about cash ISAs
Don’t be fazed by financial jargon. ISAs simply stand for ‘Individual Savings Accounts.’ They work just like an ordinary savings account but unlike ordinary savings accounts they could make your savings go so much further.
How?
• Better interest rates will help make your nest egg grow - the interest rate offered by cash ISAs can be up to six times higher than the base rate.
• The interest you earn from your cash ISA savings is tax free.
• There are also tax benefits from investing in an Investment ISA. Returns within an Investment ISA are free of UK capital gains tax and income tax, although where relevant tax is withheld on any dividend income. However, as your money is invested in the stock market, the value of your investment and any income they produce can go down as well as up, so you could get back less than you invested.
Remember that the tax treatment of ISAs could change in the future.
What if I need my money?
There is a wide choice of cash ISAs available, including instant access, fixed rate, and accounts with base rate guarantees. So there’s no need to tie up your money unless you want to - you can opt for an instant-access cash ISA, which means you get your hands on your money whenever you need to.
How much can I save?
All UK taxpayers now have an annual ISA allowance of £10,680. This is the maximum amount of money that individuals can invest in ISAs in any given tax year. You can transfer your savings into cash ISAs or invest in Investment ISAs as follows:
• Up to £5,340 of your annual ISA allowance can be saved in a cash ISA
• You can invest the remaining £5,340 in to an Investment ISA
• You can invest the full sum of £10,680 in to an Investment ISA
Should you wish to invest in an Investment ISA, it’s sensible to seek assistance from your financial advisor. Money deposited in an Investment ISA is invested in the stock market. This means that its value can fluctuate as earnings depend on the performance of the underlying investments, so you could get back less than you invested.
Eligibility for tax relief within an ISA, and the benefit of this to you, depends on your circumstances, and the rules around ISAs could change in the future.
For more information about cash ISA rates, Investment ISAs and our latest ISA deals, visit www.barclays.co.uk.
This article has been written for information and interest purposes only. The information contained within this article is the opinion of the author only, and should not be construed as advice or used to make financial decisions. Expert financial advice should always be sought and any links contained within this article are included for information purposes only.
Barclays is a major global financial services provider engaged in retail banking (bank accounts and instant access savings accounts), credit cards, corporate banking, investment banking, wealth management and investment management services, with an extensive international presence in Europe, the Americas, Africa and Asia. With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 140,000 people. Barclays moves, invests and protects money and provides, small business bank accounts, life insurance, home insurance, a mortgage calculator, guides on how to buy shares and other services for over 49 million customers and clients worldwide. For further information about Barclays, please visit our website www.barclays.co.uk.
- Barclays Research ‘Consumers set to lose out on cash ISA allowances.’ (25 Mar 2010)
