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Britons with as little as £50 a month to spare are being urged not to overlook ISAs, with experts warning that small, regular contributions could grow into a five-figure sum over time.

ISA season is already underway as savers compare providers ahead of the annual allowance reset on April 6. The issue has taken on added urgency following the recent Government Budget, which set out plans to reduce the Cash ISA allowance for under-65s from £20,000 to £12,000 from April 2027.

One investment expert said the announcement has sparked a surge in interest, with online ISA searches up by 50% and a growing number of first-time savers keen to use their allowance before the end of the tax year.

However, beginners are also at greater risk of making common mistakes that could cost them thousands of pounds in lost returns, the Mirror reported.

Antonia Medlicott, founder and managing director of Investing Insiders, highlighted several pitfalls new ISA users should avoid.

One of the biggest misconceptions, she said, is the belief that ISAs are "all or nothing".

She said: "Many people think that if they can't afford to put thousands into an ISA each year, then it's not worth doing. That simply isn't true.

"Even £50 a month, or £600 a year, could add up to five figures over 20 years."

According to Medlicott, investing £50 a month into a Cash ISA paying an average 3.9% interest could build a pot of £18,134 after 10 years, including more than £6,000 in tax-free interest. She added that contributions can always be increased as income grows.

She also warned that many beginners are overly cautious about Stocks and Shares ISAs, often viewing them as gambling compared with the perceived safety of Cash ISAs. While acknowledging the risks of market investing, Medlicott said holding too much in cash carries its own danger.

"If inflation averages 4% and your Cash ISA earns 3%, your money is losing purchasing power every year," she said. "It's a silent, guaranteed loss."

She pointed to data showing average returns of 9.64% for Stocks and Shares ISAs over the past decade, compared with 3.9% for Cash ISAs. On that basis, £50 a month invested over 20 years could grow to £36,243 in a Stocks and Shares ISA, almost double the £18,134 from cash savings.

Another common error is letting ISA allowances go unused. Medlicott stressed that any unused portion of the £20,000 annual allowance is lost once April 6 passes and cannot be carried forward.

She added: "ISAs aren't just about this year, they're about creating a permanent tax wrapper around your savings."

She estimated that failing to use £5,000 of a Cash ISA allowance each year for a decade, assuming a 4% interest rate, could cost a saver around £10,000 in missed growth.

Using an ISA like a standard savings account is another trap. Because the allowance is limited, withdrawing and reinvesting money can quickly use it up, potentially exposing savings to tax. Medlicott warned that unless savers use a Flexible ISA, replacing withdrawn funds could mean losing tax-free status.

Finally, she said choosing the wrong type of ISA can be costly. For example, first-time buyers saving for a home may benefit most from a Lifetime ISA, which offers a 25% government bonus on contributions of up to £4,000 a year. Long-term savers may be better suited to Stocks and Shares ISAs, while those saving for short-term goals could prefer Cash ISAs.

Medlicott said: "ISAs aren't one size fits all. It's essential to understand your goals and check the terms and conditions carefully to make sure you're using the right account for your situation."