New Tax ISA

New Individual Savings Account

For those who have been keeping an eye on the news, you will have noticed that yesterday (19/03/14) was George Osbone's budget speech. One of the key aspects to the budget was the revaluation of a new tax free ISA.

I have written about ISAs in the past. ISAs are individual savings allowances, essentially a wrapper for your savings to shield them from taxation. Previously, you could put up to £5,760 in cash into one of these tax free wrappers each year. Alternatively, you could put up to £11,520 of investments (non-cash savings) such as stocks and shares into and investment ISA and shield it from tax. Or else, you could put a combination of tax and cash into ISAs assuming the cash part is no more than £5,760 and the total does not exceed £11,520.

Drawback of ISAs

One of the criticisms of the ISA was that the cash part was too low and did not allow people the ability to save enough money each year to build up savings eg for a deposit. In answer to the critics from the 1 July 2014 savers can put up to £15,000 in to either a cash ISA, an investment ISA or a combination of both, with no maximum limit below £15,000 on either category. This change should allow savers to make a real difference to any pot they at trying to build.

Many savers will take the opportunity and place more of their money into a cash ISA. However, I would note that with Bank of England base rates still at 0.5%, an all time low, the best cash ISA rates are 1.65%. As such, I would suggest that some of your money, regardless of who you are, should be in investments. Why not start off putting 5% of your monthly income into a cheap FTSE100 tracker? And you can shield it from tax in your new investment ISA!

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