Which towns love tax-free saving the most?

In 2023, only 28% of new account openings in Great Britain were into a cash ISA (according to our own analysis of CACI data). This leaves potentially millions of pounds of hard-earned savings not protected from the taxman.

Our research also shows that there are a higher proportion of savers in some parts of Great Britain making the most of tax-free saving than others. Can you guess which these areas are?

Drum roll please…

1. Shetland Island (Lerwick)
2. Darlington
3. Durham
4. Teeside
5. Carlisle

(Source: CACI’s CSDB, Jan – Dec 2023)

Savers in these towns are all doing great at keeping more of their hard-earned money for the future.

Now, onto you and your needs. If you don’t have an ISA yet, here are four reasons why you should think about opening one.

1. Saving money into an ISA is tax-free

Depending on which tax band you’re in, you could be paying tax on any interest you make from your savings account. You can calculate if you need to pay tax on your savings by using our personal savings allowance calculator. However, saving money into an ISA is completely tax-free – something that's important to 90% of people (according to research carried out by us*).

And it’s not often the taxman gives you something for nothing, so when the opportunity comes knocking it makes sense to take advantage of it.

First off, let’s start with some basics:

• ISA stands for Individual Savings Account
• Unlike other savings accounts, you won’t have to pay any tax on the interest that’s earned –no matter how much this is
• There is a limit on how much you can save tax-free into an ISA each tax year – this is your annual allowance and it currently stands at £20,000
• You can’t roll over any unused ISA allowance into the next tax year. That’s why it’s a good idea to make sure you make the most of your ISA allowance each year if you can.

2. There are a range of ISAs for different needs and financial goals

It’s really important to find an ISA that’s right for your needs. But our research tells us that when it comes to choosing an ISA, two in five people are unsure which account is most suitable for them*.

A good place to start when navigating the world of ISAs is by thinking about what you want to achieve with your money. For example, you might be saving for a new car or simply want to put money aside in case of an emergency.

For these types of needs, an Easy Access Cash ISA might be right for you. With this type of ISA you can withdraw your money when you need to – all whilst keeping the tax-free benefits.

Or if you can tie up your money for a bit longer, our Fixed Rate Cash ISAs typically offer higher rates of interest. You can’t make withdrawals during the fixed term, although you can close your account early by paying an interest penalty. If you do this, you may get back less than you paid in.

We also offer a Cash Lifetime ISA (LISA) to 18- to 39-year-olds. This can be used to save for your first home or retirement. You can pay up to £4,000 tax-free each year into this type of ISA. The government then pays a 25% bonus on top (up to a maximum of £1,000 a year).

There are strict rules on withdrawing from a LISA. You can withdraw money once the account has been open for 12 months to buy your first home. But for any other withdrawals before the age of 60, a 25% government charge applies. This means you would get back less than you paid in.

Another option could be a Stocks & Shares ISA. These involve investing your money with the aim of achieving higher returns than you would from a typical savings account. Stocks & Shares ISAs are only suitable for long-term goals of five or more years away – like saving towards retirement.

The good news is, if you have a range of different needs you’d like to save for, you’re covered. Each tax year you can split your total ISA allowance in any way you like between the different kinds of ISAs there are.

3. It feels like there’s more incentive to save into an ISA than ever

Firstly, interest rates are higher than what we’ve been used to in recent years (at the time of writing) – meaning now could be a good opportunity to receive a decent level of return on your money (remember, that’s a tax-free return!).

Secondly, the government has recently announced some rule changes surrounding ISAs which came into force at the start of the new tax year on the 6th of April this year.

Historically, savers have only been able to open one type of each ISA in any given tax year.

However, as long as you’re 18 or over, you can now open multiple ISAs of the same type each tax year (excluding LISAs). This means you can shop around for the best deals, opening a new account if a more competitive rate crops up – giving you greater flexibility over how you save.

4. Be more like Shetland Island (Lerwick) – our ISA experts are here to help

Our research also finds that nearly a third of people have been put off opening an ISA due to confusion about the rules*. That’s why our ISA experts are here to make sure you’re in the know. We can help you to make informed decisions with the aim of growing your money in a tax-efficient way – including helping you choose the right type of ISA for your goals.

You can visit your local branch or call us to get started with one of our ISA specialists.

*2024 Research carried out on behalf of Skipton Building Society by OnePoll (survey of 2000 UK adults).