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Darlington Building Society has urged UK savers not to “sleepwalk” into missing out on the full benefits of their ISA allowance. Chief executive Andrew Craddock warned that “savers risk handing over more of their hard-earned interest if their savings aren’t in the best accounts to suit their needs”.
With rumours that current rules around ISAs may change in Rachel Reeves’s next Autumn Budget, savers are being encouraged to act now to make the most of their tax-free savings. Using an Individual Savings Account (ISA), people living in the UK can currently save up to £20,000 tax-free per year. Mr Craddock said: “The message needs to be understood. If you’ve got money sitting in a savings account or a regular account and you’re not using your ISA allowance, you could be losing out.”
Mr Craddock explained that once the tax year ends, you can’t carry your £20,000 tax-free allowance forward.
He said: “It’s unfortunately a case of use it or lose it, and we’re most concerned about low-income families who will find saving difficult in the first place.”
According to the mutual, millions leave their full allowance untouched, and many still don’t realise that interest earned outside of an ISA counts towards their personal savings allowance, which has not risen in line with inflation.
The personal savings allowance allows basic-rate taxpayers to earn up to £1,000 in interest tax-free each year in a normal savings account, while higher-rate taxpayers are limited to £500. Additional-rate taxpayers get no allowance at all. Whereas, savers across all tax bands can save up to £20,000 a year tax-free using an ISA.
Mr Craddock said: “Savers have faced huge uncertainty over the past few years. But now that interest rates are more favourable, it’s vital people know first what options are available to them, and secondly, how to maximise their returns. For lower-income savers, it’s important to plan ahead to maximise the timeframe of the ISA allowance, as saving little and often throughout the year also helps to build up a savings buffer.
“[If] an announcement on the ISA allowance comes, it may be too late to make a significant deposit if disposable cash isn’t available in a lump sum in the same way it could be for higher-income savers.”
Chancellor Rachel Reeves recently confirmed that the Government has no plans to cut the ISA allowance, following widespread criticism sparked by rumours of a potential reduction to £4,000. However, she has indicated that changes to how ISAs function may still be on the table, though the specifics remain unclear.
Mr Craddock added: “Top up regularly, shop around, and speak to someone if you’re unsure. We’ve seen growing interest in ISAs at branch level – people want security, but they also want to know their savings are working hard, tax-free.”
According to a nationally representative survey conducted by Darlington Building Society, more than six in 10 (63.7%) people with a household income under £17,000 say they have no savings at all.
This compares with just 8.2% of those earning between £100,000 and £149,999 – underlining a widening gap in financial resilience between the lowest and highest earners.
