The tax man gets an extra £500 million in tax as a result of people not making full use of their cash ISA allowance - that's £50 each.
Source: Nationwide research, 2012
An Individual Savings Account (ISA) is a tax-efficient way to save or invest. UK residents aged 16 and over can choose to save in a cash ISA or if they are 18 or over, a stocks and shares ISA or a combination of both. Parents or guardians could also open a Junior ISA for children under 18.
The interest on a cash ISA isn't taxed so all the interest you earn you keep. With a stocks and shares ISA, all gains are free from capital gains tax, you don't even need to declare your ISA investments to the tax man.
The beauty of ISAs is that they don’t end when the tax year does. You take it with you into the new tax year meaning each year you get the tax benefits on the cumulative amount. You can keep adding to your ISA and the sooner you do this in the new tax year the more you maximise the tax benefits ISAs give you.
You can only invest with one cash ISA provider in each tax year and the same, or another stocks and shares provider.
With Nationwide you can split your cash ISA allowance between our full range of cash ISAs, for example save some in an ISA with instant access and some in a fixed term ISA.
Each tax year you have an ISA allowance, for tax year 2013/2014 (6 April 2013 until 5 April 2014) your allowance is £11,520. You can save up to £5,760 in a cash ISA with the remainder in a stocks and shares ISA, or, you can invest your full allowance in a stocks and shares ISA.
Take a look at the table below to see some examples of how you could split your full ISA 2013/2014 allowance between a cash ISA and a stocks and shares ISA.
There are 3 types of ISA available, a cash ISA, a Stocks & Shares ISA and a Junior ISA, find out more below.
Cash ISAs are savings accounts where interest is paid tax free, you can currently save up to £5,760 each tax year in a cash ISA.
In today's low interest rate environment, you may be wondering how to try and make your money work harder.
Here are just a few good reasons to consider investing in a Stocks & Shares ISA:
Providing you're comfortable with both investing for five years or more and the increased risk associated with investments, they offer greater potential returns than traditional savings. Nationwide has a carefully selected range of investment funds provided through Legal & General, all of which can be invested tax efficiently as a Stocks & Shares ISA so you can use up to your full ISA allowance.
The value of your investments can go down as well as up, so you could get back less than you invested.
Find out more about a Stocks and Shares ISA
Junior ISAs were introduced by the government in November 2011. A Junior ISA is a tax efficient way to save for your child’s future and is designed for children under the age of 18 who do not hold a Child Trust Fund voucher. The Junior ISA encourages both parents and children to save, with the aim of ensuring that children have some money behind them on their 18th birthday to help them make the transition into adult life. Nationwide currently offer a Junior cash ISA for children.
The current annual Junior ISA limit for tax year 2013/2014 is £3,720.
Tax-free is the contractual rate of interest payable where interest is exempt from income tax.
The tax information provided is based on our current understanding of current law and HM Revenue & Customs practice which can change.
FSCS - Protecting your money. Find out more
Your eligible deposits with Nationwide Building Society are protected up to a total of £85,000 by the Financial Services Compensation Scheme, the UK's deposit protection scheme. This limit is applied to the total of any deposits you have with the following: Nationwide Building Society, Cheshire Building Society, Derbyshire Building Society, Dunfermline Building Society and Nationwide UK (Ireland). Any total deposits you hold above the £85,000 limit between these brands are not covered.
Please click here for further information or visit www.fscs.org.uk