Savings tax warning as one in five ISA savers make this simple HMRC mistake | Personal Finance | Finance

One in five savers with an ISA is unaware they cannot roll over the annual amount that can be saved into the next year.

This blind spot means many are set to miss out on investment gains and tax savings unless they take urgent action.

Research by Shawbrook found 19 percent of ISA holders wrongly believe can roll over their ISA allowance, which stands at £20,000 per year, to the next tax year.

At the same time, 16 percent of savers incorrectly think they can backdate their ISA allowance to cover previous years.

While more than one in ten – 13 percent – are unaware that they can make savings into an ISA at any time in the tax year.

Adam Thrower, Head of Savings at the specialist bank Shawbrook, said: “It’s use it or lose it with ISAs and savers should be mindful of the annual ISA allowance reset.

“It’s crucial to understand you can’t carry over unused contributions.

“If you haven’t yet used up this current year’s ISA limit now is the time to review your contributions and consider topping up before April 6.”

Tips to keep on top of your ISA investments

* Understand the “Use it or Lose it” rule: Unlike some accounts, your annual ISA allowance resets to £20,000 each April 6.

Any unused portion from the previous year cannot be carried forward, so make sure to utilise it before the deadline.

* Be aware that for basic rate taxpayers only up to £1,000 of interest on savings income will now tax-free. The figure is a lower £500 for higher rate taxpayers. ISAs offer a haven, letting money grow tax-free on interest earned.

* Review and top up before April 6. As the tax year nears its end, check your ISA contributions. If you haven’t reached your £20,000 limit, consider contributing the remaining amount to benefit from tax-free growth.

* Don’t lose your allowance with withdrawals: Withdrawing money from your ISA and redepositing it counts as a new contribution, eating into your current year’s allowance.

Instead, you must use providers’ ISA transfer services to seamlessly switch providers without impacting your allowance.

* Compare fixed-rate ISAs before they mature: For fixed-rate ISAs nearing maturity, compare current market rates before renewing. This ensures you’re getting the best possible return on your investment.

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