Millions of people in Britain now use a tax-free Isa as a form of saving, new research has found.

The data revealed one in three people now have an Isa, which the Government claims has encouraged Britons to save for a rainy day.

A quarter of those surveyed said they were attracted to the savings scheme because of the tax-free benefits on offer.

The findings come as the Government plans reforms to the Isas scheme in April next year, which will give every adult an annual Isa investment allowance of up to £7,200. Some 40% of people already have £8,000 or more in their Isa account.

Economic Secretary to the Treasury Kitty Ussher said: "This research helps to confirm the success of Isas in encouraging people to save, enabling them to build up a financial asset.

"Next year we will be introducing reforms to build on that success.

"We will make Isas simpler to use, more flexible, and more generous with a higher investment limit."

Under the plans, up to £3,600 can be saved with one provider while the remainder can be invested in stocks or shares.

Ms Ussher said the changes will "encourage even more people to use Isas to save".

The Government has also announced it has set up a website to ensure people transferring money to friends and relatives overseas are getting the best deal for their money.

The site will allow consumers to look at what the local currency rate will be when they exchange their cash, and will also give them advice on what to do if things go wrong.

International Development Secretary Douglas Alexander said: "The UK is home to large and diverse ethnic minority populations.

"When these people send money home to loved ones they play a key role in tackling poverty in the developing world.

"By working with the financial sector to improve transparency and competition among payment organisations we are making it cheaper and easier to send money - which is good for families, good for reputable companies, and good for international development."

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