People aren’t using their ISA cash allowances, study finds (Image: Getty)
The bank has issued an £8,129 warning to everyone with an ISA over upcoming account changes. On average, cash ISA holders have used just over £8,000 (£8,129) of their ISA allowances in the current tax year, leaving more than £11,000 (£11,871) to use by April 2027, according to Tesco Bank research.
40% of ISA savers said they were more likely to explore other cash savings options in the next financial year, such as fixed rate savings accounts. There will be major changes next year, with the maximum amount that savers aged 64 and under can put into a cash ISA falling from £20,000 to £12,000 per tax year.
To use the full £20,000 limit, under 65s must contribute the remaining £8,000 to a Stocks & Shares or Innovative Finance ISA. Alternatively, they can invest the entire £20,000 in a cashless ISA. Tesco research shows people are not using their full limits before the changes come into force.
Tesco said: “Overall, those with a Cash ISA are showing positive signs of being active savers. 43% of Cash ISA owners regularly save money into their ISAs, whether weekly or monthly. 50% say they contribute funds into their Cash ISAs from other savings accounts, thereby taking advantage of the tax efficiency they offer.”
While one in ten (11%) money ISA holders have yet to contribute anything to their ISAs this year, a third (34%) have managed to invest more than £10,000 this financial year.”
The survey found that a quarter (25%) of cash ISA owners see them as a good savings tool when it comes to managing their money, with a third (33%) of people with ISAs holding more than one account. This is an important reminder that you can open and pay into any number of ISAs, provided the owner does not exceed the total limit of £20,000 per year.
From April 2027, anyone under the age of 65 will no longer be able to contribute £20,000 each tax year into a cash ISA – the limit is reduced to £12,000. But the overall ISA limit will still remain at £20,000 – personal finance expert Martin Lewis explained that this means you could save £12,000 in a cash ISA and then have the remaining £8,000 to save in another type of ISA.
He said: “The ISA limit is £20,000 and will remain at £20,000 even for under-65s after 2027, which means you can put £20,000 into a shares ISA, you can also put some of the money in cash.
“Let’s say you invest £1,000 in cash, which reduces the amount you can invest in shares by £1,000 because the total is still £20,000.
“You can do this all the way up to £12,000 from 2027. So you could have £12,000 in cash and £8,000 in shares. You don’t have to invest in shares.
“From now on you can only have £12,000 in cash. The key to this rule is that it only affects new money deposited.”