Over 50s could shield an additional £43,000 from the taxman by making full use of the new ISA allowance, Fidelity International has claimed.

Following the introduction of the new limit, which enables over 50s to save up to £10,200 in an ISA, Fidelity claims that a 50 year old basic rate tax payer investing the full allowance in an ISA-wrapped corporate bond fund each tax year – paying an annual interest rate of five per cent – could provide an investment return of more than £78,000 when they turn 65.

However, for those investing in the same fund outside an ISA, tax deductions would mean the investment growth would amount to less than £60,000 – a decrease of 31 per cent, resulting in more than £18,000 being handed over to the taxman.

Meanwhile, an investor paying a higher rate of tax could protect even more of their returns.

For example, the tax wrapper that an ISA provides would enable an over 50 investor, who is set to be subject to the new 50 per cent tax, to shield an additional £43,000.

Explaining the tax benefits of an ISA, Paul Kennedy, director of tax wrapper & trust planning at Fidelity International said: “I cannot put it more simply: if you have savings you must consider an ISA. If you pay tax an ISA should be the first place that any non-pensions savings go.

“I suspect that many people recognise an ISA to be tax-advantageous but few really understand just what that means and just how much money they could be throwing away.”

Mr Kennedy continued by saying anyone investing outside an ISA could end up “throwing away a huge amount of money over the years”.

“An ISA puts all the money back into your pocket and your pocket alone,” he added.

© Fair Investment Company Ltd