Brits Handover £57 Million in Tax Unnecessarily

Britons are handing over an estimated £57 million to the tax man unnecessarily by not taking advantage of tax-free saving, according to a new study from Santander.

Britons are handing over an estimated £57 million1 to the tax man unnecessarily by not taking advantage of tax-free saving, according to a new study2 from Santander. 

  • 11 million Britons pay tax on their savings instead of taking advantage of an ISA
  • Social experiment confirms research findings as British public also say no to cash on the street 

The results of the study were brought to life through a social experiment3; carried out on the streets of London today, as passers-by repeatedly turned down the offer of a free five pound note handed back to them by an actor dressed as ‘the taxman’. 

The experiment, which saw just five per cent of passers-by accept the money, was set up by Santander to demonstrate that Britons are saying ‘no’ to free cash from the tax man by not maximising their tax-free saving allowance. 

According to the study, over a fifth (21 per cent) of Britons – equal to around 11 million people - have a taxable savings account, but have not taken advantage of an ISA product, so they are paying tax on their savings while their tax-free allowance remains untouched.   

The research highlighted a lack of awareness as to the benefits of an ISA, with almost a quarter (24 per cent) of people unaware of the fact that it enables tax-free saving. When asked about the annual allowance, only 26 per cent were aware of the new £15,000 maximum, which came into effect last year. 

As the end of the tax year approaches Santander is raising the awareness of ISAs to help savers make sure they take advantage of the tax-free interest available to them. 

Helen Bierton, Head of Savings at Santander commented: “Our study shows that people are not making the most of their tax free savings allowance and are therefore paying more tax than they need to. The social experiment brought this to life. ISAs are an excellent way of shielding savings from tax but, despite having been around for over 15 years, many people are still unaware of their benefits. 

“Santander is committed to helping families make the most of their hard-earned cash. Our range of ISAs give customers the chance to earn interest tax free. We have a range of products available, including products for our new and existing 1|2|3 and Select customers which offer a higher interest rate in addition to the cashback and interest available on these accounts.

“In addition, we will also be launching the UK’s first standalone ISA app in partnership with Monitise. The app will deliver a new channel of choice for customers and will provide financial education to help people maximize their tax efficient savings, and make it easier for customers to save with Santander.”

Personal finance expert Jasmine Birtles commented: “I really want people to understand the benefits of ISAs so that they can make the most of their money. I think that people are missing out on the ISA opportunity because they don’t understand what’s being offered, just like we saw in the social experiment. As the end of the tax year approaches, now is a great time to make the most of this tax-saving scheme before the deadline on 5th April."

In advance of the 2014/2015 deadline, Santander’s research reveals that 14 million4 people are planning to make deposits and account applications between now and 5th April. Of these last minute savers, around 2.5 million (18 per cent) say they will open a cash ISA for the first time.  

Santander’s Fixed Rate ISAs and Direct ISA SAVERs are available to open online at www.santander.co.uk/uk/isas, as well in branch and over the telephone. All Santander cash ISAs accept transfers in from existing cash ISAs and can also be topped up in the new tax year, helping customers keep all their ISA savings in one account.

- Ends -

The information contained in our press releases is intended solely for journalists and should not be used by consumers to make financial decisions.

Notes to Editors 

Figures have been extrapolated based on a total UK adult population size of 50,501,583 (ONS)

1£57 million has been calculated as follows:

o    21% of people currently have money saved in a taxable savings account, but do not have any form of cash or stocks and shares ISA. This is equivalent to 10,720,866 people. According to our study, the average amount held in taxable savings accounts by these savers is £1,963. 

o    Savers are therefore paying tax on an estimated £21,045,059,958
            (£1,963 * 10,720,866) unnecessarily.  

o    Average rate for the ‘Top 10 Easy Access Accounts’ in the market is 1.35% AER (Moneyfacts.co.uk, 6th March 2015)

 - £21,045,059,958 * 1.35% = £284,108,309

o    A basic rate tax payer would pay 20% on this interest. 

 - £284,108,309 * 20% = £56,821,662
= £57 million

2Opinium Research surveyed 2000+ adults on behalf of Santander 13th - 16th February 2015 and 3rd – 6th March 2015. Results have been weighted to nationally representative criteria.
3Santander asked an actor to hand out £5 notes to the general public on London Bridge during the morning rush hour. 
427.6% of people will open a cash ISA, transfer funds into a new cash ISA or add additional funds to a cash ISA between now and midnight on 5th April.  50,501,583*27.6% = 13,938,436

About Us

Santander UK is a leading financial services provider in the UK and offers a wide range of personal and commercial financial products and services. As at 31 December 2014, Santander UK serves more than 14 million active customers with c. 20,000 employees and operates through 921 branches and 66 regional Corporate Business Centres. Santander UK is subject to the full supervision of the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) in the UK. Santander UK plc customers are protected by the Financial Services Compensation Scheme (FSCS) in the UK.

Banco Santander (SAN.MC, STD.N, BNC.LN) is a retail and commercial bank, based in Spain, with a presence in 10 main markets. Santander is the largest bank in the euro zone by market capitalization. Founded in 1857, Santander had EUR 1.43 trillion in managed funds, 12,950 branches – more than any other international bank – and 185,400 employees at the close of 2014. It is the largest financial group in Spain and Latin America. It also has significant positions in the United Kingdom, Portugal, Germany, Poland and the northeast United States. In 2014 Santander made an attributable profit of EUR 5,816 million, 39% more than the previous year.

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