ISAs remain the super stars of tax saving options in the UK

In fiscal year 2021-2022, the maximum Britons can save in ISAs is £ 20,000. Photo: Getty Images

Individual savings accounts (ISAs) will save Britons £ 3.7 billion ($ 4.9 billion) in income tax alone, new data from the ONS has revealed.

The annual ISA tax savings increased by 42% over the past five years, as the allowance increased, investments and savings increased, and more money was accumulated over longer periods of time. long.

The goal of ISAs is to encourage individuals to save over time by removing the tax on savings income.

The cost of ISAs has increased over time, the ONS said. The limit has been increased to £ 15,240 for the 2015 to 2016 tax year and to £ 20,000 from 2017 to 2018.

Costs fell from 2020 to 2021 primarily due to falling stock valuations in the wake of COVID-19, but are expected to continue to rise over time as wealth builds within ISAs.

In fiscal year 2021-2022, the maximum you can save in ISAs is £ 20,000.

“ISAs are expected to save us £ 3.7 billion in income tax this tax year. And in an age when taxes are skyrocketing, every penny makes a huge difference, ”said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.

She said the British are heading for a much higher tax period – where tax as a percentage of GDP is at its highest level since the 1950s.

“The government is firmly in recovery territory, using the gap between the peak of the pandemic and the next election to attract as much money as possible to repay the unimaginable levels of borrowing needed to get us out of the crisis.”

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It makes tax breaks more valuable than ever, and Coles says Britons should get the most out of their ISAs and retiring allowances, which makes sense for them this tax year.

“It’s worth considering what you can free up on this side of the April deadline,” she said.

Equities and ISA shares also save Capital Gains Tax (CGT) on the sale, so anyone who made £ 12,300 on their investments this tax year could also save the CGT.

Previous figures showed the average ISA wallet was worth £ 28,530, “so there will be a lot of people grateful for the CGT economy.”

For those saving in an ISA for life, there is also the government bonus on top of the tax savings, so there is even more to be gained from these schemes.

ONS data also showed income tax relief on pension schemes is expected to cost the Treasury £ 22.5 billion this tax year, and insurance relief nationwide at £ 19.7 billion. Both are expected to be lower than in the previous tax year.

Stamp duty relief for first-time buyers is expected to save Britons £ 430million this year. This figure was significantly lower in 2020/21 due to the stamp duty holiday that applied to all buyers. It was not removed until September 2021, which also affected this year’s numbers.

The fact that there is no inheritance tax on transfers between spouses and civil partners is expected to save Britons £ 3.8bn this year. This figure increased during the pandemic in part due to rising house prices and growth in investment, and sadly also because more people have died.

The most valuable tax break is on food, which is expected to save us £ 20.7 billion this year. It has increased dramatically since the start of the pandemic as the British have stayed and spent more on food.

The fact that there is no capital gains tax payable on the sale of the house you live in “is the biggest tax break of all,” Coles said.

“As prices have gone up it is more and more valuable and is poised to save us £ 30.2 billion this tax year.”

According to a survey commissioned by Hargreaves Lansdown, the five most hated taxes in the UK are inheritance tax (24%), income tax (17%), VAT (15%), income tax savings and investments (15%) and taxes on sin. of which sugar, alcohol and gasoline (10%).

Watch: What is national insurance and do I have to pay for it?

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