It's the year of the ISA, but still we waste £3.8bn

It's one of the golden rules when it comes to looking after your personal finances: if you've money to save, head straight for a mini cash individual savings account (ISA).

In this way, £3,000 of your cash will grow tax-free every year, often at rates of more than 5 per cent. In many cases, ISAs allow you instant access to your money in an emergency.

"Mini cash ISAs are a complete no-brainer," says Anna Bowes of the independent financial adviser (IFA) Chase de Vere. "What's the point in paying tax when you don't need to? Especially when these accounts tend to pay at least Bank of England base rate [4.5 per cent] and above, which is better than your bog-standard savings account."

Many warnings have been issued about the failure of Britons to save enough for their retirement, or even for a rainy day. But it seems that the message might at last be getting through.

Nick Robinson, managing director of the internet bank Intelligent Finance, last week suggested that the UK could be on track for a record year in terms of new ISA accounts.

Intelligent Finance reports that the number of cash ISA accounts taken out in the first three months of the current financial year (between 6 April and 5 July) rose by 13.1 per cent to 5.6 million, from 4.95 million last year.

But it still leaves plenty of us failing to take advantage of this tax break. Some 25 million people continue to sacrifice interest on savings in banks and building societies instead, according to research from the Portman building society. That means we're missing out on up to £3.8bn in tax-free interest.

With five months before the end of this tax year, Ms Bowes urges savers to take action.

"People tend to think about cash ISAs only in March and April - but there's a good few months of tax-free savings still to be had this year."

Portman is currently topping the best-buy tables with its 25-days' notice mini cash ISA, paying 5.25 per cent. Savers have to invest the full £3,000 in one lump sum, and the headline rate includes an introductory bonus of 0.65 per cent that drops away after six months.

For smaller balances, the Halifax ISA Saver Direct is paying 5 per cent on as little as £1, with no short-term bonus.

Saffron Walden, Herts and Essex building society also offers 5 per cent on balances of £1 upwards, with no introductory bonus. But savers must give 180 days' notice of any withdrawal.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

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