ISA limits finally on the rise 

One welcome surprise to emerge from the Budget was the increase to individual savings accounts (ISA) investment limits. When ISAs appeared in April 1999, the initial maximum total contribution was £7,000 per tax year. It was not until 2008/09 that this was improved — to £7,200. The increase announced in the 2009 Budget was a more useful £3,000, bringing the maximum total ISA investment to £10,200 per tax year. The corresponding limit for the ISA cash component has also risen, to £5,100. 

The way in which the new limits will operate 
is not straightforward. Unless you were born
before 6 April 1960, the new £10,200 ISA
ceiling will not apply to you until 2010/11.
The higher limit will be available from 6
October 2009, if you are aged 50 or over by
the end of this tax year. 

At a time when the taxes are increasing, 
ISAs offer one of the easiest ways to 
reduce HMRC's slice of the return from 
your investments.

There is another non tax-saving ISA feature
that can be valuable in terms of time (and
accountancy costs): nothing to report on
your tax return. 

Past performance is not a guide to future returns. The value of investments and income from them can go down as well as up, and you may not get back the original amount invested.  Levels and bases of, and reliefs from, taxation are subject to change and their value depends on individual circumstances.


ISA feature                                                            Maximum tax savings 

Any income generated does not figure in               60% from 2010/11 if income falls into the band
in any of the total income calculations for               where the personal allowance is phased out.
the new pension tax relief rules or next
tax year's phasing out of the annual
allowance.

Interest from deposits in cash ISAs and                  50% from 2010/11 for a new top rate
from fixed interest securities in stocks                    taxpayer.
and shares ISAs is free of UK Tax.

For stocks and shares ISAs, there is no                 32.5% from 2010/11 for a new top rate
additional UK tax on dividends,                               taxpayer.
although the 10% tax credit cannot
be reclaimed.

All gains are free of UK capital gains tax.               18%