When is an ISA a NISA? From July 2014, thanks to George Osborne and the changes announced in this week’s Budget.
So, apart from the name, what has changed with ISAs (Individual Savings Accounts) and savings more generally? How will you benefit? Are there any negatives? What opportunities will you have?
Read on and we’ll tell you all you need to know.General advice call to action
What are the main changes to ISAs?
The changes to ISAs are wide ranging and whilst they do nothing to alter the fact that interest rates are still at all-time lows, they will allow savers to shelter significantly more money from tax, and increase flexibility for those people who want to take less risk with their capital.
- The maximum you can contribute to an ISA will rise from £11,520 to £15,000
- The increase will come into effect from July 2014
- Savers have only been able to contribute half of the maximum level into a Cash ISA, therefore £5,760 in the current tax year. This will change under the new rules, with savers able to contribute the full £15,000 to a Cash ISA
- Transfers from Stocks & Shares ISAs to Cash ISAs will now be allowed, which was not previously the case
- The maximum annual contribution to a Junior ISA will rise to £4,000
- The ISA rules will be amended to allow peer to peer lending
George Osborne announced that two new Pensioner Bonds will be issued in January 2015 via National Savings & Investments (NS&I).
The bonds will be available for one and three year fixed terms, with a maximum contribution of £10,000.
In his speech Mr Osborne suggested that interest rates could be around 2.8% for the one year bond and 4% for the three year account.
Savers over the age of 65 will be keen to learn more about these bonds, especially if the rates quoted by the Chancellor actually materialise.
The Chancellor announced that from the summer the maximum amount an individual can hold in Premium Bonds will rise from £30,000 to £40,000. Furthermore, from 2015 /16 the maximum will rise to £50,000.
Whilst many loyal Premium Bond holders will no doubt jump at the chance to increase the amount they hold, they should remember the effective rate of return is generally lower than inflation.
Abolition of 10% savings tax rate
The starting rate for savings Income Tax will be set to 0% and the band to which it applies will be extended from £2,880 in 2014 / 15 to £5,000 as of 6 April 2015.
Reaction to the changes
Save Our Savers gives the Chancellor one and a half cheers for today’s Budget.
Simon Rose, of Save our Savers, a pressure group campaigning for savers, said: “We welcome today’s Budget announcements, particularly the changes to the 10% savings band for which we have long campaigned, as this affected the very poorest of savers.”
Rose continued: “Increasing the flexibility of ISAs and direct contribution pensions is a great step forward, while the advent of pensioner bonds will not only help those who qualify, but may force the banks and building societies to compete for savings and increase rates.
However, while the Chancellor has certainly made some long overdue improvements to the savings market, it remains the case that UK savers are still heavily disadvantaged compared to borrowers.”
We’re here to help
The changes will give savers far more flexibility and opportunities to shelter their cash from tax.
If you would like to know more about the changes to your savings, we’re here to help; call one of our team of Independent Financial Advisers today on 0115 933 84330115 933 8433, alternatively enquire online or email firstname.lastname@example.org