Have you used your 2009/10 ISA allowance?Posted on: 17 March 2010 by Mark O'haire
ISAs are falling in popularity, with four in 10 savers turning their backs on the tax-efficient savings vehicles this year.
Price comparison site Moneysupermarket.com polled 1,200 users and discovered that four out of 10 people weren't planning to use their ISA allowance for 2009/10.
Just over half (51%) of the respondents who won't be investing said they simply couldn't afford to save, but a further 24% said they didn't understand ISAs so they avoid them. The remaining 26% said they couldn't be bothered to save at all.
So is it still worth using your ISA allowance?
Half of Moneysupermarket.com users that took part in the poll think so, with 50% of respondents having already invested their allowance for this tax year. The vast majority of these savers (70%) have opted to invest in cash ISAs only, with 19% opting for stocks and shares ISAs. The remainder (11%) have split their allowance between cash and stocks and shares.
With a flat, low base rate over the past 12 months, it has been tough for savers and the outlook for 2010 is not much better, especially with a rise in inflation, which erodes the real returns on your savings. For UK tax payers, ISAs are a useful tool to make their savings work harder for them, although savers have to be savvy and shop around for the best deal.
Kevin Mountford, head of banking at moneysupermarket.com, says: "If you are a UK taxpayer, it makes total sense to utilise your tax allowance so you can make your savings work harder for you. If you are a higher rate tax payer then it is even more important, and with the new 50% tax bracket coming into force from 6 April, there will be many consumers who will be looking to review their finances to protect against taxation. The ISA allowance for over 50s is increasing to £5,100 from 6 April giving a greater incentive for tax paying savers.
"Savers are quite rightly feeling a little hard done by at the moment but ensuring you're getting the best return on your money is more important than ever in a low-rate environment. ISAs offer a valuable tax-break helps those that are already putting cash aside to save even more. Consumers that can afford to save should be looking at ISAs, no question. Even though rates are low, the benefits of a tax-efficient wrapper should not be overlooked. Savers who have funds in older ISA accounts should remember that in most cases they are able to transfer these funds to their new ISA without losing the tax free status. With many older ISA accounts now paying a pittance it is important to transfer your funds to make the most of this pot."
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