Just 9% of 35-44 year-olds took out an ISA in the tax year 2013-14 (latest data available from HMRC).1 This is despite data from Citizens Advice showing that 58% of this age group are saving.2
Savers missing out on tax savings
The ISA allowance allows savers and investors to shelter up to £20,000 from income and capital gains tax. Meaning they not only keep more of their returns but also have the opportunity to have a greater benefit from compound interest. Just under 4 million people in this age group are missing out on tax savings.
Women are more likely to have an ISA than men
35-44 year-old women are 9% more likely to take out an ISA than men, this is despite them earning around 14% less than their male counterparts.3 However, when looking at stocks and shares ISAs men are 45% more likely to invest their ISA allowance. Women are running the risk of losing the tax benefit from their ISA.
In April 2016 the personal savings allowance was introduced. The allowance allows savers to enjoy returns equalling either £500 or £1,000 tax free. This has rendered the cash ISA somewhat redundant as savers would need to enjoy at least 3% returns to receive any real benefit from the ISA.
That’s why many are turning to the stocks and shares ISA; the amount invested in stocks and shares ISAs has increased by 28% over the last tax year. With falling interest rates and a rise in inflation on the horizon individuals need to ensure they make use of the tax benefits available to them. And more than just using them, they need to ensure the products within that tax wrapper are working hard in order to offer them the best possible returns.
1 ISA Statistics from HMRC, August 2016
2 Citizens Advice, November 2015
3 ONS survey of hours and earnings, 2015
