Stocks and shares ISAs underused by savers

A quarter of UK adults own stocks and shares, yet many are failing to make use of their tax-free stocks and shares individual savings account (ISA) allowance, research has claimed.

Only 14 per cent of those surveyed by First Direct had used their available ISA allowance, with 14 per cent of these saying they didn't know how an ISA worked and six per cent saying the application process was too complicated.

A further six per cent said they didn't know that a stocks and shares ISA existed.

One in ten said they had yet to use their cash ISA limit, 'perhaps not realising that this was not a prerequisite for holding a stocks and shares ISA,' said First Direct.

Savers are able to invest a total of £11,520 into an ISA in the 2013/14 tax year, with any gains being free from income tax and capital gains tax. Of this amount, a maximum £5,760 can be invested in cash. The remaining sum can be placed in a stocks and shares ISA. Alternatively, the full £11,520 could be invested in stocks and shares.

The research also found that 62 per cent of savers had never transferred their ISA to another provider, and 87 per cent were unaware that the annual ISA limit had increased to £11,520 for 2013/14.

Andy Forbes, head of product at First Direct said: "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."

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