The Individual Savings Account, or ISA for short, has become hugely popular since it was introduced in the late 1990s. But from 1st July ISAs are changing.
Firstly they will now be called the New ISA or NISA for short. But far more importantly there are other changes, which will bring huge opportunities for savers.
So what’s changing? How can you benefit? What action do you need to take? We’ve got all the answers right here.
#1: Limits are rising
Currently you can pay up to £11,520 into an ISA, but from 1st July the maximum will rise to £15,000.
The benefit is simple, you can save more money tax-efficiently. In fact in less than 12 months from now a couple will be able to shelter up to £60,000 from tax.
Holding money outside an ISA rarely makes sense, whether you’re a saver or an investor, make sure you put the maximum you can into an ISA each year, before you look at other options.
#2: Use it or lose it
An ISA is a ‘use it or lose it’ allowance; if you don’t contribute the maximum amount each year, you can’t carry forward the unused allowance to the next tax-year.
#3: (Nearly) triple the benefit for Cash ISA savers
Until the changes were introduced, savers were only allowed to put half the maximum allowance into a Cash ISA.
We’ve often said this was unfair and discriminated against savers, now something has finally been done about it.
From 1st July Cash ISA savers will be able to use the full ISA allowance of £15,000; almost three times the previous limit.
#4: De-risk and transfer from Stocks & Shares to Cash
Before the changes, an investor with a Stocks & Shares ISA could not reduce the risk they were taking, by transferring to a Cash ISA.
Thankfully, this will also change.
From 1st July it will be possible to transfer a Stocks & Shares ISA to transfer to a Cash ISA and reduce their risk. There’s no longer any need for people who want to be savers to be reluctant investors.
#5: Shelter more money from tax as interest rates rise
Most experts agree that interest rates will rise soon, indeed Mark Carney the Governor of the Bank of England said last week it could happen sooner than people think.
Some savers have not being using their annual ISA allowance, reasoning that the interest rate they get is so low, it means the tax saving of an ISA isn’t worth having.
This is the wrong.
The more money you get into an ISA now, the more you will benefit from the tax-free interest when rates rise; don’t just think about the here and now, look to the future.
#6: Prepare for future flexibility
ISAs are changing, limits are rising, they are becoming more flexible and the Government is consulting on allowing a wider range of investments, such as peer to peer lending.
The more money you can get into an ISA now, the more you will benefit in the future.
Don’t miss out
George Osborne surprised everyone when he announced the changes to ISAs, we certainly believe they are ‘nicer’ than they ever were, but only if you follow our hints and tips and take advantage of the new rules.
Of course we’re here to help too. If you have questions about your savings, or would like to learn more about how ISAs can benefit you, our team of advisers are here to help.