British savers are paying too much tax even though they know about it, according to a new study.

According to research by Britannia Building Society, 48 per cent of British adults have never had an Individual Savings Account (Isa), which means they are missing out on tax-free savings.

Not only that, but 30 per cent do not know what an Isa is, the study found.

There are several varieties of Isa on the market, but the most common is the simple cash savings version, which is tax free on sums up to a certain limit.

Neville Richardson, chief Executive of Britannia, says the research revealed "many misconceptions about Isas" and the fact that "people just don't understand how they work".

He added that it is "a shame" that many savers are being unnecessarily taxed twice - first on their income and then again on their savings.

Meanwhile, National Savings & Investments has reported a large increase in new customers in the wake of the Northern Rock credit crisis, the Times has reported.

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