The taxman could get a big boost with 4.3 million consumers planning to withdraw cash from their Isa accounts, often acting in disgust over low savings rates.
Research from USwitch.com showed these savers are prepared to withdraw a total of £9.5 billion, losing them £196 million of tax-free interest.
Falling interest rates, the need for extra cash and hunting elsewhere for a better deal are the top reasons offered by consumers for the cash withdrawals.
But consumers who withdraw their cash Isa savings can’t change their minds and put cash back in – as allowances for that year disappear after a withdrawal (see our guide to cash Isas).
Savers should remember that the best way to switch an Isa to another provider without losing their tax allowance is to make a transfer rather than withdraw the money and re-invest it elsewhere (see our guide to Isa rules)
Rumina Hassam, from USwitch.com, said: ‘Low rates will not last forever and as soon as the base rate starts to climb again, savings rates will follow suit.’
Providers continue to offer average rates of 2.05%, with best buy Isa accounts offering as much as 4.25%, rewarding Isa customers with £153 in interest each year – tax free.
This compares with just £8 in the average taxable savings account.
To make the most of your Isa allowance, see our cash Isa Best Buy tables for the top market rates.
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