As of 6th April this year ISAs are changing - make sure you're up to date.
While ISAs (Individual Savings Accounts) are here to stay for the time being, 2008 will see changes to this tax free system of savings. While these amendments are designed to make the whole ISA scheme more accessible, understanding these changes is essential if you want to maximize your savings for the year ahead.
As of 6th April, 2008 every eligible UK resident over the age of 16 will have the opportunity to save an extra £200 a year free from tax in an ISA savings account. This takes the total tax free limit from £7,000 up to £7,200, however as with the current system, things aren’t quite as straight forward as they seem.
(In the 2009 budget the Chancellor announced that the ISA limit is set to increase to a total tax free savings allowance of £10,200, £5,100 of which can be saved as cash. This is set to come into effect later in 2009 for those over 50 and next year for all other savers).
If you’ve never got your head around the concept of Mini and Maxi ISAs you’ll be pleased to know that this distinction is now being removed. However, there will still be limits on how you can invest your money. Instead of the Mini/Maxi split you will be able to save up to £3600 in a Cash ISA (up £600 from the current £3000 cash limit), or if you choose to, the whole £7200 as equity in stocks and shares.
Additionally, unlike the current rigid ISA scheme, as of the 6th April you will be able to transfer funds held in a cash ISA into a stocks and shares ISA component, allowing you maximum flexibility with your investments.
It will also be possible to transfer maturing Child Trust Funds into tax free ISA accounts after April in an attempt by the government to encourage young people to develop good savings habits and continue them throughout their adult life.
