Budget 2014: £15,000 Isa boost for Britain's savers
Chancellor George Osborne unveiled a Budget boost for Britain's Isa savers by announcing they can save up to £15,000 a year tax-free in a "New Isa".
In a huge reform designed to encourage Brits to save more money, stocks and shares Isas and cash Isas will be merged to create a new simplified account.
Until now, people have been forced to split their tax-free savings between the two types of Isa, with the limit for stocks and shares Isas set at £11,520 in the current tax year and the maximum for cash Isas set at £5,760.
But from 1 July 2014 that limit will rise to £15,000 in the new single Isa, with savers permitted to hold the full amount in cash, stocks and shares, or a combination of the two.
In another significant change, savers will also be able to transfer their funds from a stocks and shares Isa to a cash Isa for the very first time.
The move has been welcomed by industry experts and consumer groups.
Rebecca O'Keefe, head of investment at Interactive Investor, said: "The New Isa regime comes with a new name, increased allowances and greater flexibility – this is fantastic news for savers and investors.
"Increasing the flexibility on investment choices and allowing investors to choose whether they want to save or invest is a major enhancement for all those looking to provide for their future."
Nationwide chief executive Graham Beale added: "[This] is great news for Britain's savers. We have been campaigning for this to happen for many years now and I am delighted the chancellor has responded to our calls.
"The impact this will have on people looking for ways to make the most of their savings will be huge with people now able to put in £15,000 a year with much greater flexibility.
"It will reduce confusion on the differing amounts which could be saved in cash and stocks and shares and more importantly give people more flexibility to earn tax-free interest."
The government also announced it will also raise the maximum amount savers can invest in a Junior Isa (Jisa) or Child Trust Fund from £3,720 to £4,000 on 1 July.
Available from 1 November 2011, the Junior ISA will replace child trust funds (CFTs), which have been phased out. Junior ISAs will have a £3,000 limit and will be offered by high street banks, building societies and other providers that currently offer ISAs to adults. You can invest in either stocks and shares or cash. But, unlike CTFs, there will be no government contributions into each child’s savings pot. Money invested in Junior ISAs will be “locked in” until the child is 18, and the ISA will default to an adult one.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.