25 March 2014
Research* conducted by Nationwide Building Society has highlighted a lack of understanding amongst UK adults about the amount of tax paid on savings. Nearly two thirds (63%) of Britons did not realise that basic rate tax payers pay 20% tax on any interest earned on a standard savings account. In addition, more than a third (37%) were unaware that you pay no tax on the interest earned in an ISA.
One in seven (15%) incorrectly think a basic rate tax payer pays no tax on a standard savings account, while more than one in ten (12%) think a basic rate tax payer actually has to pay tax on savings in a cash ISA. Unlike ordinary savings accounts, the interest earned in an ISA is tax-free.
When it comes to the battle of the sexes, more men (43%) correctly stated a basic rate tax payer pays 20% on savings interest compared with just 32% of women.
Age also makes a difference, with six out of ten (60%) of 18-24 year olds not realising that saving in an ISA means interest is tax-free. Knowledge of the tax rules seemingly grow with age with 72% of the 55s and over correctly knowing you pay no tax on interest earned in an ISA.
Darren Bailey, Head of Savings Pricing at Nationwide Building Society, said: “Many people in the UK appear to have little knowledge on the amount of tax they pay on their savings, which could be costing them a fortune in valuable interest.
“This lack of understanding that interest is tax-free in an ISA but not on a standard savings account could mean many savers are giving more money to the taxman than they need to.
“The last few years haven’t been easy for savers and it’s more important than ever for people to recognise there are ways of making their money work harder. Following a campaign by Nationwide Building Society, the Chancellor not only increased the cash ISA limit in line with stocks and shares ISAs in the recent Budget – double the previous cash ISA limit – he also raised the maximum limit to £15,000.
“Nobody likes paying more tax than they need to, so savers should ensure they fully utilise their ISA allowance before opting for a standard savings account.”
Notes to editors:
*Research carried out by YouGov Plc of 2,404 UK adults between 7 and 10 March 2014. The survey was conduct online. The figures have been weighted and are representative of all UK adults (aged 18+).
Full details of Nationwide’s savings accounts can be found at http://www.nationwide.co.uk/products/savings
Nationwide is the world's largest building society as well as one of the largest savings
providers and a top-three provider of mortgages in the UK. It is also a major provider of current accounts, credit cards, ISAs and personal loans. Nationwide has around 15 million members.
Customers can manage their finances in a branch, on the telephone, internet and post. The Society has around 16,000 employees. Nationwide's head office is in Swindon with administration centres based in Northampton, Bournemouth and Dunfermline. The Society also has a number of call centres across the UK.