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Over 40% of those with stocks and shares don't use their tax free allowance

08 Apr 2013

Recent research* by first direct has found that 25 per cent of UK adults own stocks and shares, however only 14 per cent have used their tax free** Stocks and Shares ISA allowance. 

When asked why they weren't using their Stocks and Shares ISA allowance 14 per cent said they didn't understand how they worked, six per cent found the application process too complicated and a further six per cent didn't even know they existed.  One in ten said they hadn't managed to use their Cash ISA limit yet, perhaps not realising that this wasn't a prerequisite for holding a Stocks and Shares ISA.  

The research also found that 62 per cent have never transferred their ISA to another provider and only 13 per cent knew that the ISA limit increased to £11,520 from 6 April 2013 (up to £5,760 of which can be put in to a Cash ISA). 

Andy Forbes, Head of Product at first direct commented: 

"I would urge all those, especially high rate tax payers, who'd like to invest in stocks and shares to ensure they take advantage of their ISA allowance to avoid missing out on potential tax savings." 

first direct has compiled a list of ISA facts to help savers avoid confusion. 

  • The new tax year began on 6 April 2013 and the total annual ISA allowance increased from £11,280 (2012/13) to £11,520 (2013/14).
  • The maximum amount that can be saved in a Cash ISA 2013/14 is £5,760, however any unused Cash ISA limit can be used for a Stocks and Shares ISA instead.
  • Stocks and Shares ISAs allow deposits of between £1 and £11,520 depending on the amount saved in a Cash ISA.
  • first direct offers two types of Stocks and Shares ISA:
  • A Selected Investments Fund or SIF where investors can choose from 8 carefully selected funds and can decide the level of risk they'd like to take
  • A Stocks and Shares ISA where investors can choose their own stock market investments whilst still taking advantage of their tax free allowance.
  • The benefit of a Stocks and Shares ISA is that all investors, including higher rate tax payers, won't pay Income Tax or Capital Gains Tax on any increases in the value of their investment.
  • Every tax year there is a maximum ISA subscription, however previous tax year balances can be transferred into the new ISA account each year.
  • An ISA can be transferred to another provider at any time in a tax year and as many times as wished. However the yearly limit is fixed, so if £11,520 was invested with the first provider once switched no more money can be added.
  • The value of investments (and any income received from them) can fall as well as rise and Stocks and Shares ISA investors may not get back the money they put in. For some investments this can also happen as a result of exchange rate fluctuations as shares and funds may have an exposure to overseas markets.
  • Stock market investments should be viewed as a medium to long term investment (for at least 5 years).
  • It's recommended that investors keep enough money (around six month's salary) outside their investment portfolio.

 

-Ends- 

 

For further information please contact Rebecca Hirst on 0113 276 6899, rebecca.hirst@firstdirect.com or Amanda Brown on 0113 276 6700, amanda.brown@firstdirect.com  

Notes to Editors

* Research carried out on behalf of first direct by Opinion Matters in February 2013.  2,034 people aged 16+ were surveyed. Full research available on request.

**'Tax free' means free from UK Income Tax and Capital Gains Tax.  The survey found that 505 people had stocks and shares and 290 had a Stocks and Shares ISA i.e. 42.57% of those with stocks and shares do not have a Stocks and Shares ISA. 

first direct offers a non-advised proposition.  Those requiring advice can seek out an independent adviser or be introduced to HSBC Premier Client Manager if they have £50,000 or more to invest. 

Why don't you use your stocks and shares ISA limit?

 

 I don't have enough money

34.10%

I do use my stocks and shares ISA limit

18.80%

I don't understand how they work

13.70%

Other, please specify

11.70%

I haven't used my cash ISA limit yet

9.70%

The application process is too complicated

6.30%

I didn't know they existed

5.70%

Average ISA balances by region

 

Average ISA balance at the end of 2013 tax year

% difference to UK average ISA balance

Rank - highest to lowest

East

£9,506.70

-5.80%

9

London

£11,539.89

14.34%

1

Midlands

£10,461.48

3.65%

3

North East

£9,982.14

-1.10%

6

North West

£10,132.14

0.40%

5

Northern Ireland

£9,923.33

-1.70%

7

Scotland

£10,363.89

2.69%

4

South East

£9,796.92

-2.93%

8

South West

£9,119.68

-9.64%

11

Wales

£9,275.00

-8.10%

10

Yorkshire

£10,536.59

4.40%

2

UK Average

£10,092.82

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first direct facts

  • Winner of Best Online Savings Provider of the Year - Consumer Moneyfacts Awards Jan 2013
  • Winner of the Moneywise Most Trusted Savings and Cash ISA Provider June 2012
  • Winner of the Which? Best Financial Provider and Moneywise Most Trusted Financial Provider awards 3 years running

first direct provides both telephone banking and online banking services to its 1.2m customers.  It offers a full range of personal banking products including its award winning Current Account and offset mortgages.

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