New research from Leeds Building Society has revealed that savers will potentially miss out on more than £56,500 in tax-free savings through the planned 12-year freezing of the ISA allowance threshold.

Whilst only 16.9% of savers used the full amount of their tax-free allowance last year, many people had hoped that the Chancellor would finally raise the £20,000 ISA allowance, which has stayed the same for seven years, as part of the Autumn Budget.

However, the government’s decision to keep the ISA allowance the same for a further six years will mean by 2030 the threshold will have been frozen for 12 years, whilst CPI has continued to increase. Increasing the ISA allowance, even by a small amount, would be a way to give something back to savers.

Although savers may be relieved that the Chancellor has not placed any restrictions on how much money can be saved in total in ISAs, this means the value of their savings has decreased in real terms, as inflation has pushed up the cost of living.

Up to the end of the last tax year, just over £11,000 in tax-free savings has been ‘lost’ through the ISA allowance limit not keeping up with CPI, with a further £45,500 forecast to fall victim to inflation by the end of the 2029/30 tax year.

Leeds Building Society is encouraging savers to review their finances to ensure they are maximising any returns on savings. Even with the allowance capped, savers would be wise to maximise their ISA allowance where possible.

Catherine Wray, Senior Manager for Savings at Leeds Building Society, said: “ISAs are very popular with our customers and the population more broadly, allowing them to make the most of their savings without worrying about paying tax.

“Taxes are clearly an important part of life – without them it would be impossible to pay for public services and support those who are financially vulnerable.

“However, increasing the ISA allowance even by a small amount would be a way to give something back to savers across the country.

“This is particularly significant when the annual personal savings allowance, of £1,000 for basic rate taxpayers or £500 for higher rate taxpayers, has also remained unchanged for a number of years. As wages have increased whilst income tax thresholds have remained the same, more people have tipped into a higher tax bracket, impacting their tax-free allowance amounts and making ISAs even more important.”

ENDS

*Figures taken from the commentary for annual savings statistics: September 2024 – GOV.UK

Leeds Building Society Research Findings

The data has been compiled using the ONS Consumer Price Index figures and OBR predicted inflation figures. For each year, the previous annual inflation figure has been applied.