Nearly one in 10 cash ISA savers leave it late, waiting until near the end of the tax before making a lump sum payment into the tax-free savings wrapper, research from Paragon Bank has revealed.
Paragon’s survey of over 1,000 cash ISA savers showed that 9% of cash ISA savers wait until the end of the tax year before putting money into a cash ISA.
The majority, 67%, invest at the start of the new tax year on 6 April, with the remaining 24% making regular payments into their ISA during the course of the tax year.
Bank of England data shows that March 2024 experienced the second biggest increase in cash ISA balances during the 23/24 tax year. The Bank’s figures show that cash ISA balances increased by £6.1 bn during the month, second only to April 2023, which recorded an £11.9 billion increase.
Excluding March and April, the average monthly increase in cash ISA balances during the 23/24 tax year was £3.1 billion.
Savers could be missing out by waiting until the end of the tax year before making their deposit. For example, £20,000 earning 4.3% interest would generate £860 per year in interest.
Placing that £20,000 in an ISA account at the start of the tax year would protect any interest from tax, but keeping it in a non-ISA account offering the same rate for 11 months of the year would incur an income tax bill of £113.33 for higher-rate taxpayers and £352.50 for additional-rate taxpayers.
Paragon Bank’s Managing Director of Savings Derek Sprawling said: “The key months for ISA savers are March as the tax year draws to a close and April and May as the new tax period starts and the £20,000 ISA allowance resets.”
He added: “It’s normal for people to review their finances towards the end of the tax year and to utilise any of their remaining ISA allowance if they have spare savings. It’s a pattern we have seen over numerous ISA seasons.
“However, I would urge savers not to leave it too late as many providers take best buy accounts off the shelves in the run-up to the tax year end to manage their service levels. Savers with sizable deposits could also incur unnecessary tax on their interest if they keep it outside of the tax wrapper.
“If you do intend to utilise your ISA allowance late in the tax year, give yourself enough time to get the account you want and don’t leave it until the final few days of the tax year.”
