Since the government introduced the tax-free Individual Savings Account (ISA) in 1999, there have been a number of tweaks to how ISAs operate, and the individual investment limit per year has been increased a number of times from the original £7,000 maximum subscription. In the March 2014 Budget, Chancellor George Osborne announced not only a revised maximum investment limit for the current tax year (2014-15), but also introduced other changes to ISA rules – branding products under the new scheme as “New ISAs” or NISAs.
As in previous years, the total annual subscription limit was revised upward from 6 April 2014, from £11,520 to £11,880. However, further changes would apply from 1 July 2014, with the subscription limit rising again to £15,000, and more sweeping changes also coming into effect. In previous tax years, the annual subscription limit covered the total of both Cash ISA and Stocks & Shares ISA investments but, crucially, your Cash ISA element could only be funded up to a maximum of one half of the year’s total subscription limit. In the 2013–14 tax year, for example, you could invest up to £11,520 in total, but could put only half of that (£5,760) into a Cash ISA – anything over and above that amount had to be invested in a Stocks & Shares ISA option.
From 1 July 2014, you can invest up to 100% of your subscription limit into a Cash ISA if you choose to do so. Alternatively, you can invest the full £15,000 in a Stocks & Shares ISA, or divide your investment between Cash and Stocks & Shares options however you wish. Additionally, under the New ISA regime it is possible to transfer investments from a Cash ISA to a Stocks & Shares ISA, and vice versa. In short, this means much greater flexibility in how you can take advantage of your tax-free ISA savings limit each year. Bear in mind that if you do choose to transfer funds between ISAs (including from one Cash ISA to another with a different provider) it’s important to follow the correct transfer procedures via the provider that you’re transferring to – they will deal with the actual transfer of funds from your existing provider and inform HM Revenue & Customs.
Junior ISAs saw the subscription limit rise from £3,720 to £3,840 from 6 April, increasing again from 1 July to £4,000. If you don’t already have an ISA for your child, it’s worth checking the eligibility criteria (essentially, Junior Cash and Stocks & Shares ISAs are available to children under 18 who weren’t entitled to a Child Trust Fund account between 2002 and 2010). It’s also worth considering that, due to a loophole in ISA rules, it’s possible for children aged 16–17 to hold both Junior and adult ISAs within the current tax year, allowing tax-free savings of up to £19,000.
If you have already invested the pre-July cash limit of £5,940 into a fixed-rate Cash ISA, most providers are allowing customers to top up their investments to the new £15,000 limit after 1 July – but you should be aware that deadlines will apply, and the cut-off dates vary significantly from one provider to another. While most ISA providers are allowing top-ups through to the end of July, a handful will allow them right through until 5 April 2015 – however others, including NatWest and Royal Bank of Scotland, are only allowing top-ups until mid-July.
Overall, the new ISA (NISA) rules and limits are great news for savers – offering both greater flexibility and the opportunity to save even more tax-free. All London Private Wealth clients with a True Potential Wealth Platform can top up existing ISAs and Pensions quickly and easily with ImpulseSave, making it simpler to add money to existing advised investments in order to reach your financial goals.