ISA changes - It's all change for ISA rules and investment limits
On 19 March 2014 in the Government’s 2014 Budget the Chancellor, George Osborne, surprised the Financial Services industry by announcing major changes to the Individual Savings Account (ISA) rules. It was announced that ISAs would be reformed into a simpler product called New ISAs (NISA) which have been designed to clarify the options available to savers and investors wanting to take advantage of tax efficient savings.
Historically, Individual Savings Accounts allowances have increased in line with inflation with a total amount of £11,520 being available to be invested in the 2013/2014 tax year and, initially, £11,880 in the 2014/2015 tax year. From 1 July 2014 the NISA limit will be £15,000, which is the biggest ever increase to ISA limits.
In addition, there is now greater flexibility with the new plans. Savers have the option to save the whole of the NISA allowance in cash or in stocks and shares, or as a combination of the two. For example:
- £5,000 to a Cash NISA and £10,000 to a Stocks & Shares NISA
- £10,000 to a Cash NISA and £5,000 to a Stocks & Shares NISA
However, it should still be noted that you are only able to open one cash NISA and one stocks and shares NISA each tax year.
In addition, the rules on transferring ISAs have been relaxed. Historically, you have only been able to transfer a cash ISA to another cash ISA, a stocks and shares ISA to another stocks and shares ISA or a cash ISA to a stocks and shares ISA. Going forward, you will also be able to transfer stocks and shares to a cash ISA should you wish.
The changes announced in the 2014 Budget have again highlighted the importance of seeking independent financial advice when considering how to utilise your ISA/NISA allowances. Returns for cash ISAs are still poor when compared to inflation, especially when looking at accounts offered by the main high street bank/building societies. However, there are alternative plans available. Remember too that advice should always be sought before you action your stocks and shares savings.
Should you wish to discuss the New ISAs in more detail please contact Paul Chilver.
Paul holds the Diploma for Financial Advisors and is a member of the Institute of Financial Services. He also holds the Certificate in Long Term Care Insurance.