The New Individual Savings Accounts – Q&A
…Or NISAs as we must learn to call them.
Most of the headlines surrounding George Osborne’s recent Budget focused on the far-reaching changes he made to pensions legislation – the ‘biggest shake-up of pensions for over a hundred years’ as he termed it.
However there are also big changes planned for Individual Savings Accounts, with the rules being revised from July 1st this year.
We know that a lot of our clients like to use ISAs for their savings and benefit from the tax advantages: this is likely to increase after July 1st. We therefore thought it might be helpful if we answered all the questions clients have been asking us about the proposed changes to the rules and the introduction of NISAs – New Individual Savings Accounts.
Why has the Chancellor made these changes?
George Osborne described his Budget as one for ‘the makers, the do-ers and the savers.’ He’s long been concerned that the average person in the UK borrows too much and saves too little and these changes are part of his attempt to address that.
What’s he proposing?
Firstly he’s proposing an increase in the annual ISA limit to £15,000. In the Autumn Statement last year the Chancellor said that the limit for the tax year 2017/15 would be £11,880 but – from July 1st – it will increase to £15,000 and that figure will apply until 5th April 2015, by which time we’ll have had the 2015 Budget speech.
But I’ve already contributed my £11,880 for this year…
No problem. From July 1st you’ll be able to contribute an additional £3,120 to bring you up to £15,000. If you have contributed £5,940 into a cash ISA, then you’ll be able to contribute an additional £9,060 from July 1st.
So a husband and wife can save £30,000 a year in ISAs – or NISAs as we have to call them now?
Will there still be a limit on what I can put into a cash ISA?
It used to be the case that up to 50% of the annual allowance could go into a cash ISA but from July 1st that limit disappears. So the only limit will be the overall annual limit.
Can I move my money from stocks and shares ISAs to cash as I get older/more cautious?
Yes you can. This is another change that will be welcomed by our clients – previously you couldn’t do this, but from July 1st you will be able to.
What about Junior ISAs?
There’s good news here as well. The limit for Junior ISAs is increasing to £4,000 a year – and remember that if you are aged between 16 and 18 you can hold a cash ISA, but not a stocks and shares ISA.
This means someone between 16 and 18 can pay the full £15,000 into a cash ISA.
So all in all this is good news and NISAs will now be much more flexible?
Absolutely. We think these changes are really good news and we’d expect NISAs to play a significant part in the financial planning of a lot of our clients. Interestingly though, there’ll probably be a need for more financial planning, not less. If say, a husband and wife have £30,000 in cash ISAs – as opposed to £11,880 under the old rules – then it’s going to be even more important that they’re receiving the very best interest rate on that money.
Similarly if you have £15,000 in a stocks and shares ISA – and potentially a lot more as the investments build up over the years – the performance of your fund manager(s) becomes ever more important. So the changes to the ISA rules will probably mean working more closely with your financial advisers.
Only that we’ll be encouraging our clients to use these new allowances: as we’ve always stressed, it makes sense to make use of all the tax free allowances that are available to you.
If you have any other questions on the changes to ISAs – or if you’d like any help on working out exactly what you can contribute in the current tax year – then as always don’t hesitate to contact us. We’re only a phone call or an e-mail away.
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