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From 6 April 2008, people will be allowed to save up to £3,600 in a cash ISA and up to £7,200 in a stocks and shares ISA, within a total annual savings limit of £7,200.
Richard Saunders, from the Investment Management Association said: “It is good to see the Government recognising the importance of ISAs in the UK savings market. But a 3% increase after nine years is not much and we will look for more in the future”.
This will be good news for the plus 16 million investors who together have policies worth more than £180bn.
As it stands, each tax year, someone can invest:
• Up to £3,000 in a cash mini ISA
• Up to £4,000 in a stocks and shares mini ISA
• Or up to £7,000 in a maxi ISA, of which up to £3,000 may be in cash
However, from April 2008, someone who chooses to save the maximum £3,600 cash each year will then only be able to invest a total of £3,600 in stocks and shares, £400 less than the current allowance.
ISAs have been increasing in popularity since their introduction in 1999 mainly because they provide tax free savings.
Last December the government announced that, to help savers further, any cash already saved in ISAs could be kept in the account without eating up the next year’s savings allowance. This would mean the balance could increase over the years and accrue more interest.
UPDATE: Since writing this article, compareandsave.com have published a ‘Guide to savings accounts’ which has a whole section dedicated to explaining ISAs
Read the Individual savings accounts (ISAs) mini-guide
