In one of the most significant changes announced during George Osborne’s 2014 Budget, the rules governing ISAs will dramatically change in July of this year. Below, we break down exactly how the new rules will impact savers and allow you to shelter more from the tax man.
New ISAs, or NISAs, will be introduced in July and will enable the holding of your entire ISA allowance in a Stocks and Shares NISA, a Cash NISA, or any combination of both, up to the overall limit. Some providers may also offer the facility to hold cash tax free within a Stocks and Share NISA, which could further simplify the situation for some savers.
Increased overall ISA limit
On 1st July 2014, the overall ISA limit will be dramatically increased to a total of £15,000 from the £11,880 limit which came into force at the start of the tax year on 6th April 2014.
Abolition of the Cash ISA limit
Of the new £11,880 limit, only £5,940 can currently be saved as a Cash ISA, reflecting previous years’ limits on Cash ISAs where Stocks and Shares ISAs have always been unlimited, up to the overall limit. As part of the change on 1 July there will be no limit to how much you can save in any ISA. You could in theory put your entire £15,000 allowance into a Cash ISA, a Stocks and Shares ISA or any combination of both, up the £15,000 overall limit.
Change in ISA transfer rules
Current rules allow for the transfer of money in a Cash ISA to a Stocks and Shares ISA but not the other way around. This rule will be abolished as part of the changes on 1 July, enabling the transfer of a Stocks and Shares ISA to a Cash ISA for the first time and getting rid of another discrepancy between the rules governing the two accounts.
The changes to ISAs were received as excellent news for savers, who from July will benefit from greater flexibility, as well as the increase in tax free savings allowances.
For anyone looking to discuss their current or future ISA situation, or if you would like more information on the changes, please feel free to get in touch with us via our contact page.