UK savers are being urged to double-check their Individual Savings Accounts (ISAs) to avoid a costly blunder that could significantly reduce their returns. Financial experts highlight a widespread misunderstanding about ISA allowances that may leave thousands of pounds unprotected from tax.
The ISA Deadline Looms
With the April 5th deadline fast approaching, millions are racing to use their annual ISA allowance. However, many are making a critical error in how they distribute their funds across different ISA types.
The Common Pitfall
"We're seeing too many people splitting their £20,000 allowance across multiple ISA providers," explains Sarah Coles, personal finance analyst. "While you can open different types of ISAs in the same year, the £20,000 limit applies to your total contributions across all accounts."
How to Protect Your Savings
Follow these steps to avoid costly mistakes:
- Check your contributions across all ISA accounts
- Consolidate where possible to simplify tracking
- Prioritise higher-interest accounts
- Set reminders for next year's allowance
Financial institutions report that ISA transfers between providers have increased by 18% this tax year, suggesting more savers are becoming aware of optimization strategies.
Last-Minute ISA Tips
For those yet to use their allowance:
- Cash ISAs currently offer average rates of 4.5%
- Stocks and Shares ISAs show 7.2% average returns
- Innovative Finance ISAs provide peer-to-peer lending options
"Don't leave it until April 4th," warns Coles. "Providers experience system overloads as the deadline approaches, potentially delaying your application."
