We explain all you need to know about the new ISA limits announced in the Budget 2009.
- What Are The New ISA Limits?
- When Does The Increase Come Into Effect?
- What if I Turn 50 Between 6th October, 2009 and 6th April, 2010?
- I'm 50, Should I Hold Off Using My ISA Allowance Until October?
In his 2009 Budget the Chancellor announced plans to up the annual ISA allowance. While this is undoubtedly good news for savers who will be able to squirrel more of their money away from the tax man's claws, the increase is being introduced in stages. As a result some will see their ISA investment limits increase this year, and others not until next year.
What Are the New ISA Limits?
You are currently able to save up to £7,200 in an ISA tax free. Up to £3,600 of this can be saved as cash and the remainder invested in stocks and shares. When the new limits come into effect the total ISA allowance will increase to £10,200 and you will be able to save up to £5,100 of this in a cash ISA account.
When Does the Increase Come Into Effect?
Officially, the ISA contribution limits will increase for all savers at the start of the next tax year (6th April, 2010). However, those over 50 are set to benefit early and will see their total ISA allowance increase to £10,200 on 6th October, 2009.
What if I Turn 50 Between 6th October, 2009 and 6th April, 2010?
The treasury have confirmed that if your birthday falls between 6th October, 2009 and 6th April, 2010 you will be able to take advantage of the increased ISA limits on, or after, the day you turn 50.
I'm 50, Should I Hold Off Using My ISA Allowance Until October?
The increased ISA allowance will be applied to both new and existing ISA products so there is little reason for you to hold off making use of your tax-free savings allowance right away should you wish.
Instant access cash ISAs:
Those who have already invested, or plan to invest, in an instant access cash ISA should be able to simply top up their account with an additional £1,500 come October 6th if they wish to take advantage of the full £5,100 cash-based allowance.
Fixed term cash ISAs:
Those who have already invested in a fixed term cash ISA (or plan to invest in one) should check with their ISA provider as to whether they will be allowed to invest an additional £1,500 in the account come October.
While a number of cash ISA providers have already confirmed that they will allow those over 50 to top up their fixed term accounts come 6th October, others have not. One alternative reportedly being considered by some providers is to offer fixed term ISA customers the option to save the additional £1,500 in a linked instant access ISA account instead.
Regular saver cash ISAs:
If you have a regular saver cash ISA, or plan to invest in one over the coming months, you should check that your chosen ISA provider will allow you to increase your monthly contributions either before, or come 6th October, 2009 so that you are able to take advantage of the full cash-based allowance when it comes into play.
Stocks and shares ISAs:
Those who use some, or all of their ISA allowance to invest in stocks and shares should simply be able to up their contribution within the tax-free wrapper accordingly.
