Gordon Brown has given savers the green-light to shelter more of their money from the taxman.
From April 2008, the amount of money that can be saved tax free in Individual Savings Accounts – ISAs – will rise from £3,000 to £3,600.
Under proposals announced in the Budget on Wednesday, the allowance for share ISAs will also increase from £7,000 to £7,200.
The dual move represents the first time the limits for tax free saving have been increased since the accounts were introduced eight years ago.
The government believes increasing the limits will benefit the 5million out of the 17million account holders who currently making full use of their accounts.
To build on the “success” of the accounts, the government will simplify the regime, making it more flexible for savers and providers alike.
Transfers from the cash into the stocks and shares components of ISAs will take effect from next year, while the distinction between mini and maxi ISAs will be removed.
Savers will therefore be able to hold up to £7,200 in ISAs, of which £3,600 can be cash.
They can hold all £7,200 in share or split it between cash and shares, and it will remain the case that the interest paid into ISAs does not attract income tax.
IFA Financial estimate UK taxpayers waste £170 million a year by not using tax-efficient ISAs.
David Elms, chief executive, reflected: “Whether or not to put your savings and/or other investments into an ISA is a straightforward decision.
“If you do not use an ISA, you will pay more tax – it really is as simple as that. We would urge consumers to always take independent financial advice before taking out any financial product, but an Individual Savings Account is an excellent place for your money.”
Mar 23, 2007
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