Friday May 9, 05:55 PM
Does your 10-year-old have £50k?
By Steve Lodge
Some disciplined savers could have accumulated tax-free cash Isa balances totalling as much as £50,000, according to Financial Times research. Higher rate taxpayers with such substantial sums could now be avoiding £1,000 a year in tax
on their interest, and earning tax-free annual returns of £2,500-plus, at current rates. The £50,000 is based on savers who have fully funded 10 years of cash Isas since they were launched in 1999 - including this tax year's £3,600 - who have also kept their old Tessas (now converted into Isas), and who have let their tax-free interest roll up in the accounts. Of the total, about £10,000 represents earned interest. Kevin Mountford, head of savings at Moneysupermarket.com, said: "There has been a mindset that the £3,000 [now £3,600] annual allowance for cash Isas isn't that meaningful. These figures show the benefit of compounding and tax-free interest." But he reported that most individuals had only taken up some of their allowances and that average cash Isa balances were about £8,000. By taking out cash Isas, savers have also limited the amounts they could put in stocks and shares Isas to £4,000 a year rather than £7,000 (£7,200 in 2008/9). Malcolm Cuthbert, managing director of financial planning at Killik & Co, saidhe feared individuals were holding too much money in cash Isas in relation to their "rainy day" needs and growth-orientated investments. Cash Isas can be transferred into stocks and shares Isas as of this tax year.
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