ISA mistakes mean savers miss out

Misconceptions about how ISAs work mean many people are missing the chance to benefit from tax-free savings.

A third of people in an Alliance & Leicester poll claimed ISAs were not for them as they did not have a lump sum to invest.

Meanwhile 26 per cent were turned off from ISAs as they wanted instant access to their funds.

However, both assertions are false as ISA products exist that are open to investors with just £1 as well as providing easy access.

Ewan Edwards, head of savings at Alliance & Leicester, said: "It’s concerning people think you need a lump sum to start an ISA, when you can save from as little as £1.

"And while the idea is to use the tax-allowance to build up a lump sum, there are plenty of cash ISAs available that give you instant access to your money.

"It’s time for an end to confusion and for people to make the most of whatever they can save – and not be put off by the idea that it’s overly complicated."

He added cash ISAs should be the "first port of call" for anyone choosing a deposit account.

The UK currently holds £207 billion in ISAs and the deadline to take advantage of this year's allowance is April 5th.

A total of £7,000 can be invested a year – spread across a cash ISA (maximum £3,000) and stocks and shares or maxi ISAs.

In the next financial year, the total amount that can be invested will be raised to £7,200 a year.

Figures from unbiased.co.uk show £382 million was wasted in tax last year by British savers not taking advantage of ISAs.