1. Paying Tax You Don’t Need To

Interest from savings accounts, dividends, and capital gains are all taxable outside an ISA. Once your savings exceed the tax-free limits, you could lose up to 40% of your returns to tax, reducing your ability to grow wealth over time. Read about your personal allowances here.

Even if you’re under the tax threshold now, future earnings could push you into taxable territory. By using an ISA, every penny of interest and investment growth stays yours, allowing your money to compound faster and more efficiently.

‍Chip does not provide tax advice. Tax treatment depends on individual circumstances and may be subject to change in the future.

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2. Ignoring High Interest Rates

With interest rates relatively high, many Cash ISAs now offer 4-5% in tax-free interest, making them more attractive than they’ve been for years. A standard savings account may seem just as competitive, but if your interest exceeds your Personal Savings Allowance, you’ll owe tax, reducing your overall returns. 

Higher-rate taxpayers are especially at risk, as their allowance is currently only £500, compared to £1,000 for basic-rate taxpayers. A Cash ISA ensures all your returns remain tax-free, making it a smarter choice for long-term savers looking to maximise their earnings.

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3. Missing Out on Your £20,000 Allowance

Your ISA allowance resets every tax year, and any unused portion is lost forever. It doesn’t roll over. Waiting until next year means missing out on a full year of tax-free growth.

Even if you don’t have the full £20,000 to invest, using as much as you can still provides tax-free benefits while your wealth grows. If you regularly invest or save, maxing out your allowance now can significantly boost your long-term returns, allowing you to build a more substantial tax-free portfolio over time.

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4. Letting Inflation Shrink Your Savings

If your money isn’t growing, it’s losing value. Keeping cash in a low-to-no-interest account means inflation erodes your spending power over time, reducing what your savings can buy in the future. While a Cash ISA protects your savings from tax, a Stocks & Shares ISA can offer long-term growth that outpaces inflation, helping you preserve and increase your wealth.

If the rate of inflation is above the interest on your savings, you’re effectively losing money each year. Investing within an ISA gives your money a better chance to grow in real terms, maintaining its value over the long run.

The HMRC deadline is April 5. Once it passes, your allowance for this tax year is gone for good. Don’t miss the chance to protect and grow your wealth tax-free.

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5. Assuming ISA Rules Will Stay the Same

There’s no guarantee that the current £20,000 allowance or the tax-free status of ISAs will remain unchanged, especially as economic policies shift. 

Previous government changes have reduced tax-free allowances on capital gains and dividends, showing a trend toward tightening tax perks. By using your full allowance now, you lock in today’s tax-free benefits before any new restrictions are introduced, ensuring you don’t miss out on valuable opportunities. 

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It’s easy with Chip

If you want to get started with an ISA, Chip’s Cash and Stocks & Shares ISAs have got you covered. So, don’t miss out and begin your journey to long-term wealth today. 

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Your Chip Cash ISA is a cash ISA provided by ClearBank Limited. ISA limits apply. Deposit up to £20k per tax year. Chip does not provide tax advice or financial advice. Tax treatment depends on individual circumstances and may be subject to change in the future. 

Seccl Custody Limited is the ISA Manager for the Chip Stocks and Shares ISA. A monthly or annual ChipX membership required for certain funds selected within a Stocks and Shares ISA. Fund management charges apply ISA limits apply.Invest £20k per tax year. 

‍When investing, your capital is at risk.Chip does not provide tax or financial advice. Tax treatment depends on individual circumstances and may be subject to change in the future.