An estimated £100 million of unnecessary tax will be paid by savers who have failed to take full advantage of their annual ISA allowance, finds Nationwide Building Society.

The current ISA rules allow people to save up to £3,600 in a cash ISA, with the balance up to £7,200 in a stocks and shares ISA, and given the current economic conditions, setting money aside has never been more important.

However, according to Nationwide’s research, nearly a quarter of UK adults save nothing at all, meaning even more ISA allowances are left unused.

Only a third of people currently hold a cash ISA, and many of these account holders do not top up their ISA on a yearly basis.

This tax year alone, Nationwide estimates that cash ISA holders could fail to top up their accounts by approximately £12 billion. By saving this £12 billion in non-ISA savings products paying a gross rate of 3.75 per cent, an estimated £100 million could be paid to the taxman unnecessarily in the current year.

Andy McQueen, Nationwide's savings and mortgages director, says, ‘The end of the current tax year is fast approaching, which means there's not much time left for consumers to make use of their ISA allowance. If appropriate, one way they can make good use of the allowance is to take advantage of the fixed-rate ISA products available.

‘We understand that, as household finances are stretched, saving can be a challenge, but it has never been more important to build up savings to act as a buffer in uncertain times.’