Only one in five of those earning over £100,000 used their full ISA allowance in 2018/19
40% high earners do not have an ISA, according to data collected by HMRC.
This figure is despite ISAs providing protection from tax rates up to 60% for those who very possibly have cash available to save.
Figures that have emerged for the 2018/19 tax year, published by HMRC last week, revealed that 60% of people with an income above £100,000 have an ISA.
While only one in five of those earning over £100,000 used their full ISA allowance in 2018/19.
“Of course that’s still the majority, but when you consider how attractive an ISA is for those paying the top rates of tax, and their high level of discretionary income, it’s pretty astonishing that 40% don’t have an ISA at all,” said Laith Khalaf, financial analyst at AJ Bell.
A greater proportion of high earners have an ISA than those with income under £50,000 a year, 60% compared to around 50%, “but it’s not as big a gap as you would expect given the additional protection afforded by the ISA if you’re facing high rates of tax on dividends and interest,” Khalaf added.
This is especially true for those earning just over £100,000, as tax rates can be as high as 60% because their personal allowance starts to be withdrawn once their yearly income reaches six figures.
“It’s possible that high earners are choosing to divert their savings into a pension instead, given the high rates of tax relief they can get on contributions. But there’s still an annual contribution limit of £40,000 a year, including employer payments, which are likely to be quite generous for high earners. There’s also the Lifetime Allowance to consider, which is now frozen at £1,073,100 until 2026. Paying into a pension also doesn’t properly explain why so many high earners don’t have any ISA savings whatsoever, seeing as they work well alongside pensions as a more accessible tax shelter which you can draw on before retirement.”
Research also suggests that Britons are now more interested in bitcoin and other cryptocurrencies than stocks and shares ISAs.
A survey carried out by AJ Bell suggests 7% of Britons bought into cryptocurrencies over the last year. That compares to 5% who have invested in a stocks and shares ISA.