The Budget always brings an increase to the ISA annual allowance, but this year it brought a lot more.There are 24 million people holding ISA’s and the news should be welcome to all, who are familiar with saving in a tax efficient way.

From the days of Personal Equity Plans (PEPS) & TESSA’s, different governments have tried to encourage saving and keep the methods simple and I believe over the years they partly achieved this, but with the recent changes announced by the Chancellor, I believe they have finally got it right with the changes that are coming into place from July this year.

In the past we have had PEPS, TESSA,s Mini ISA’s, MAXI ISA’ CASH ISA’s and hopefully the new ISA dubbed the NISA, will now dispel the confusion.

A recent Savings report by Scottish Widows, suggests people have been saving more over the last two years and although half the population have a Cash ISA, only 13% have a stocks & shares ISA and the report also suggests tax incentives and the overall tax regime are two the main reasons people save, so the changes announced should be welcomed.

So what are the changes:

  • The new limits and rules take effect from 1st July and you will be allowed to subscribe upto the new limit of £15000
  • Up until 1st July you can pay in £11880, with maximum £5940 in Cash.
  • The new ISA will probably be known as an NISA
  • Any contributions paid from this tax year will count towards the NISA.
  • Any combination of Cash & Stocks & Shares will be allowed up to the limit.
  • Savers between 16-18 will also be allowed to subscribe up to the £15000 limit-but only in Cash.
  • You will be able to transfer your stocks and shares ISA to the NISA
  • NISA will now also accept certain Core Capital Shares, which are replacing PIBBs & Certain securities like retail bonds with less than 5 yrs to run

Overall the market has welcomed the changes, with a couple now able to shelter £30000 a year from tax. The rules are now simplified and more flexible, although some have questioned the reasons when austerity measures are still being hard felt, for some, the chances of sheltering £15000 from tax is not high on the list of priorities.

That aside everyone should be encouraged to save, even if only a little and these changes help whether it’s a £1 or £15000 you can put away.