Do you know your limits?
In the April 2009 Budget, the Chancellor Alistair Darling announced that the ISA tax allowance would be increased. The change is only the second increase to the ISA limit in almost a decade. But our research shows that the majority of people aren’t clear on what the changes mean to them.
In this article, we’ll explore the findings of our research and clarify just what the changes mean to you.
The research
A recent survey conducted on behalf of Legal & General by Aevolve in July 2009, identified that the majority of people, 56% of the respondents, were unclear about what changes are being made to the ISA limits.
Further analysis of the results has shown that even people who invest every year are unclear about the changes, with 47% not being able to identify that the ISA limit is increasing for the over 50s on 6 October 2009. This is surprising considering it would be safe to assume that this audience generally have a good knowledge of what’s happening in the ISA market.
The survey, aimed at people aged over 50 who have made an investment in an ISA or unit trust, has highlighted the fact that many may miss out on the opportunity to shelter more of their savings in a tax-efficient ISA in the 2009-2010 tax year.
So, what are the changes?
The announcement by Alistair Darling in the April 2009 budget stated that the ISA allowance will increase from £7,200 to £10,200. The change will come into effect from 6 October 2009, for people aged 50 or over by 5 April 2010 (that is in this tax year).
The changes mean that you’ll be able to invest up to £3,000 more into a tax-efficient ISA. As you might expect, there are some rules around how you can invest this money, which we’ve outlined below:
- You can invest up to the full £10,200 in a stocks and shares ISA.
- Alternatively, up to £5,100 of the new ISA allowance can be saved in a cash ISA with one provider. The remainder of your allowance can be invested in a stocks and shares ISA.
- You can’t invest more than £10,200 in total into a cash ISA and a stocks and shares ISA in the same year.
Don’t worry if you’re not 50 yet. As long as you’re normally eligible for an ISA, you’ll be able to take advantage of the higher limits at the start of the new tax year, which starts on 6 April 2010.
Are you missing the boat?
If you don’t want to miss this opportunity to save tax, then we can help. We’re offering a free email reminder service – all you need to do is visit our ISA limits web page, fill in your details and we’ll send you an email on 6 October to remind you that if you’re aged 50 or over by 5 April 2010, you can now invest up to the new limit.
Past performance is not a guide to future performance.
The views expressed in this newsletter are those of Legal & General (Portfolio Management Services) Limited and Legal & General Investment Management, who may or may not have acted upon them.
