Cash ISAs and Investment ISAs to merge from July
In his 2014 Budget, Chancellor George Osborne has announced a radical overhaul of Individual Savings Accounts (ISAs), abolishing separate cash ISAs and Investment ISAs and creating a simpler, more streamlined tax-free savings vehicle. These new ISAs, called New Individual Savings Accounts (NISAs), will be welcomed by savers who have been hit by poor returns on their cash ISAs over the past 5 years of record low interest rates.
A single simplified ISA
On 6th April 2014, the ISA limit that could be saved annually is set to rise from £11,520 to £11,880, with only half this amount allowed to be saved in cash. However, the new policy means that from 1st July 2014, it will be possible to save up to £15,000 in one single ISA pot. This amount can be held in cash only, investments only, or a mixture of both - in any proportion.
How will the changes work?
Between 6 April and 1 July 2014, the total amount that you will be able to pay into a Cash ISA is £5,940. If you also have a Stocks and Shares ISA, you will also be able to pay into that account up to the existing total combined ISA limit of £11,880.
From 1 July 2014, your existing ISA will automatically become a NISA, with a higher limit of £15,000 and more flexibility to choose between cash, stocks and shares, or both - whichever is best for you.
Going forward, the NISA limit will be reviewed at the end of each tax year on 5th July, as with existing cash ISAs and Investment ISAs.
A flexible tax free solution
Added flexibility will be provided by the fact that money held in stocks and shares ISAs will be permitted to switch to cash ISAs. The government said that in total, more than six million savers will benefit from the changes.