ISA limits increased

Welcome news for savers who have seen their savings income fall

Individual Savings Account (ISA) limits have been increased from £7,200 to £10,200, following the chancellor Alistair Darlings Budget 2009 announcement. The news that will be very welcomed by savers who have seen their savings income fall due to repeated cuts to the UK base rate in the past nine months.

The amount that can be put in to a cash ISA each financial year will be increase from £3,600 to £5,100. The increased ISA limits will currently only apply to those aged over-50 during this year. However, these savers will not be able to take advantage of the new limits until October 6 to give providers the chance to adjust their systems. All other savers will be able to from the start of the next tax year on April 6, 2010.

This is only the second time the limit has been increased since ISAs were introduced 10 years ago. The overall ISA limit was raised to £7,200 from £7,000 last year, with a larger increase in tax-free entitlement given to cash ISAs.

Although the ISA increase is higher than expected, the maximum tax-free entitlement will remain unequal for those depositing savings and those investing in shares, up to £10,200 can be invested in share ISAs, whereas the maximum cash ISA deposit is £5,100.

The value of investments and the income from them can go down as well as up and you may not get back your original investment. Past performance is not a guide to future performance. Tax benefits may vary as a result of statutory change and their value will depend on individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent finance acts.