As the UK tax year draws to a close, households are urged to make the most of their ISA allowances to maximise tax savings. A recent report from CapitalRise, an Innovate Finance ISA provider, reveals that the average ISA holder in the UK is set to save £422 in tax this financial year – marking a 22% increase from the previous year.
The total tax savings through ISAs are expected to reach £9.4 billion for approximately 22.2 million ISA holders in the 2024/25 tax year. This highlights the significant tax benefits available through ISAs, especially with the recent cuts to the capital gains tax (CGT) allowance outside of ISAs. Since April 2023, the annual tax-free CGT allowance has been reduced from £12,300 to £6,000, and it will be halved again in 2024/2025 to just £3,000.
CapitalRise suggested that if ISA holders take full advantage of their £20,000 annual allowance, they could save an average of £1,241 in tax this year. This comes as data shows that many savers are only utilising about 34% of their ISA allowance, leaving substantial savings on the table.
With ongoing speculation about potential cuts to the £20,000 ISA limit from 2026, CapitalRise CEO Uma Rajah urges savers to act now. She said: “The recent debate over Cash ISAs highlights the question of whether the £20,000 annual ISA allowance is always going to be there.
“It has made many realise that, if they can afford it, they should be taking full advantage of their ISA allowances.”
Ms Rajah added: “As the Government has increased taxes, it has also whittled away tax breaks in areas like buy-to-let, but ISAs, for the time being, still offer generous tax incentives.
The average ISA holder is saving hundreds of pounds a year in tax, but they could be saving much more on their returns.”
Ms Rajah emphasised the importance of exploring a range of ISA products, from traditional Cash ISAs to Stocks and Shares ISAs and IFISAs (Innovative Finance ISAs).
While Cash ISAs offer a low-risk, low-return option, IFISAs allow for investment in alternative assets, such as property-backed loans, with the potential for higher returns, albeit with higher risk.
Ms Rajah said: “There is a range of different ISA products available for people with different risk appetites. For those willing to take on more risk for higher potential returns, an IFISA is worth considering.
“With the end of the tax year fast approaching, now is the time for consumers to review their options and make the most of their ISA allowance. Whether opting for Cash ISA, Stocks and Shares ISAs or IFISAs, the key is to make an informed decision that aligns with their financial goals.”
