Archived article: This article was correct at the time of publishing. Tax, investments and pension rules can change over time so the information below may not be current.

Are people making the most of their ISAs?

Following on from our investigation into what tasks we are most likely to leave until the last minute and why, we at Bestinvest decided to look further into how late people are leaving ISA payments.

Lee Dooley Lee Dooley
02 March 2018

The initial investigation showed that one in five respondents admitted to leaving it until the last minute to use their annual ISA allowance.

The main reasons for this were a combination of laziness, having other priorities and forgetfulness. As the end of the tax year is nearly upon us, we thought what better time than now to look into whether or not people are making the most of their ISAs.

What we were looking for

The main aim of the survey and investigation was to discover more about how UK investors use their ISAs.

For a good overview there were a few key things we intended to find out:

Knowledge and understanding of ISAs:

  • Do people know when the deadline is?
  • Do people know what the allowance is?
  • Do people think ISA allowances carry over to the next tax year?

Data and stats on ISA investments:

  • How much money was invested in ISAs for 2016/17?
  • How many people used ISAs in the same period?
  • How many people left investments to the last minute?
  • How much of the full ISA amount is unused (especially due to an increased allowance)?

Research results

Knowledge and understanding of ISAs:

We ran a national survey which explored the public's knowledge and understanding of ISAs.

A staggering 78% of people wrongly guessed when the end of the tax year is, and 83% couldn't give the correct date for when ISA allowances reset. Surprisingly, only 17% showed that they understood that both dates fall on 5 April.

Just 1.2% knew that the allowance for 2016/17 was exactly £15,240. However, another 9% were close, guessing £15,000. Almost half (43%) were way off the mark and guessed £10,000 or less.

More than half of Brits (51%) were not aware that allowances do not carry over to the next tax year, which might go some way towards explaining why it is a task many choose to leave to the last minute.

Data and stats on ISA investments:

Most of the research findings were from primary research through data available here at Bestinvest and secondary information courtesy of HMRC.

Total value of ISA holdings = £585 billion

Our findings showed that in the tax year of 2016/17, 11.1 million ISA accounts were subscribed to. This was down compared to previous years and represented the lowest level since 1999/2000.

In these 11.1 million accounts, £62 billion was subscribed, bringing the total value of ISA holdings up to £585 billion.

The average investments into ISAs in the 2016/17 tax year was £5,558

The average investment into an ISA in the UK stood at £5,558. As the allowance for 2016/17 was £15,240, the average unused amount was found to be £9,682.

6.25% of total ISA contributions for the whole of the 2016/17 tax year were paid in during the last 48 hours of the tax year

Our stats at Bestinvest showed that 6.25% of ISA investments with us were made in the final 48 hours before the cut-off point – a real testament to the fact that people left it to the final moment to fill up their tax-free investments.

Making the most of ISA investments

£9,682 was the average unused amount of a tax-free ISA allowance in 2016/17 but it could be even higher this tax year as the allowance has risen to £20,000

On average, investors left almost £10,000 of their ISA allowance unused in 2016/17. While this shows there are many investors not taking full advantage of the generous tax benefits ISAs offer, it may also be due to the allowance increasing over the past few years.

Now the allowance has risen again to £20,000, this provides an even greater investment opportunity and allows for greater contributions to be made into ISAs. There is still time to open an ISA for the 2017/18 tax year and make the most of this before the tax year ends at midnight on 5 April 2018.