First introduced to the UK in 1999, ISAs are a type of saving account that stores the user’s money tax-free and often offer relatively high returns on their savings. Due to the tax-free status of the money, users are limited as to how much they can hold in their ISAs at any one time.
The average ISA market value shows the amount the average ISA is worth in a given area. If the average value is high, it means people in that region are saving more and seeing higher returns on their savings.
As the UK experiences spiralling energy prices and rising inflation, the Bank of England has raised interest rates to dissuade spending and encourage saving. While the UK government has introduced a range of support packages to help with the cost of energy bills, there are still question marks surrounding the efficacy of saving money when inflation is as high as it is.
To help get a better understanding of how to get the most out of your savings, tax experts at income-tax.co.uk have revealed the top saving hotspots in the UK and provided some pros and cons of storing your money in an ISA.
Where are the UK’s top saving hotspots?
The UK average ISA market value is £22,782. The five top saving hotspots with the highest average ISA market value in the UK are:
- The South East
- London
- The South West
- The East of England
- Scotland
At the other end of the spectrum, the regions with the lowest average ISA market value are:
- Northern Ireland
- Overseas Territories
- The North East
- Wales
- The North West
| Market Value | Average ISA Market Value (£) |
| South East | 27,620 |
| London | 24,863 |
| South West | 23,931 |
| East of England | 23,668 |
| Scotland | 22,827 |
| United Kingdom | 22,782 |
| East Midlands | 21,255 |
| Yorkshire and the Humber | 21,231 |
| West Midlands | 20,937 |
| North West and Merseyside | 20,336 |
| Wales | 20,007 |
| North East | 19,063 |
| Overseas and Unknown | 19,061 |
| Northern Ireland | 16,792 |
What does the average ISA market value indicate?
The higher the average ISA market value, the more money is being invested in ISAs. Generally speaking, more affluent areas with a higher typical household income are likely to invest more money in ISAs (and into other types of investments) as the people living there are more likely to have disposable income to save. That is not to say that there are not people in the South East who experience serious financial hardship, but the average household is likely to be better off than those in other parts of the county.
Areas such as London and the South East also have much higher house prices. So, if you are a young renter hoping to buy your first home in one of these areas, you are also more likely to invest in saving schemes such as a Lifetime ISA to help pay for the higher average price of a house.
What is an ISA?
An Individual Savings Account (ISA) is a tax-free savings or investment account that allows you to make maximum returns on a limited portion of your money by shielding it from Dividend Tax, Income Tax, and Capital Gains Tax.
There are four types of ISAs for adults:
- Cash ISAs. Cash ISAs allow you to earn tax-free interest on your cash savings. Most ISA providers offer a choice between a fixed or a variable interest rate. Fixed-rate ISAs will usually have higher returns but will only allow you to withdraw money under certain conditions. Whereas variable rate ISAs will usually have lower returns but will let you withdraw money when you need it.
- Stocks and shares ISAs. Stocks and shares ISAs use your money to make investments. However, unlike regular investments, your returns are tax-free up to a point.
- Innovative finance ISAs (IFISAs). IFISAs use your cash to offer peer-to-peer loans to individuals or businesses. IFISAs usually offer higher interest rates, but returns on investments are not guaranteed.
- Lifetime ISAs. Lifetime ISAs can only be opened by people between the ages of 18 and 40, and they can only be accessed when you reach 60 when you want to buy your first home, or if you are terminally ill. The government will add 25% to your savings, up to £1,000 per year. If you access the money stored in your lifetime ISA without fulfilling one of the prerequisites, you will lose all the interest.
There are also Junior ISAs available for children under the age of 18. There are two types of Junior ISAs:
- Cash Junior ISAs.
- Stocks and shares Junior ISAs.
How much can you save in an ISA?
Because ISAs offer tax-free interest on your savings, there is a limit as to how much you can save in them. The objective is to encourage personal saving whilst ensuring that large sums of money are still taxed properly.
For the 2022/2023 tax year, the maximum you can save across any ISAs you have are:
- Up to £20,000 for adult ISAs
- Up to £9,000 for Junior ISAs
You may notice that the upper limit for adult ISAs is lower than the UK average ISA market value (£22,782). This is because the upper limits are on how much of your own cash you can invest in an ISA, and because ISAs offer high returns, the market value of most ISA accounts has grown beyond personal cash limits.
For example, you may invest £18,000 into an ISA, and within a few years, the value of the ISA may have grown to be greater than £20,000.
How popular are ISAs?
In the tax year between 2020 and 2021, around 12 million UK adults had ISAs. This was down from around 13 million in the previous tax year. Overall, the number of cash ISA subscriptions decreased by approximately 1.6 million compared to the previous year, while stocks and shares ISA subscriptions rose by around 860,000.
Are ISAs a good way to save money?
ISAs can be a great way of making strong returns on your savings. However, that is not to say they are entirely risk-free.
Some types of ISA are more secure than others. For example, Lifetime ISAs guarantee high investment from the government, whereas the returns on IFISAs depend on the success of the investments you make and can result in losses.
There is also a risk with any form of saving or investment that inflation rates will render your savings worthless – or, rather, worth less than they were. For example, a Lifetime ISA encourages you to save for many years until you need the money at a significant point in your life. However, you may wait so long, or inflation rates may be so high that the £20,000 you saved is no longer worth nearly as much as it was when you first started saving, as things like the average house price may have rocketed in the interim.
ISAs are no different from any other form of saving or investment. You should continue to evaluate your finances as you go so you can ensure that you get as much value from your money as possible.
Summary
The national average ISA market value is £22,782. The South East has the highest average at £27,620, while Northern Ireland has the lowest at £16,792. With rising inflation and increasingly unaffordable energy costs, interest rates have been raised to encourage saving and – while saving money can never guarantee returns – ISAs are one of the most secure places to store money and see it grow with interest.
Methodology
The UK’s saving hotspots were found by analysing the commentary for annual savings on gov.uk. Regions were then ordered by the average ISA market value to find the top places in the UK to make savings.