The increased ISA allowance, announced by the Chancellor in his Budget today, will come as a relief to savers who have seen the returns from their savings and investments drop in recent months.
The ISA allowance for tax-free savings – currently £7,200 per person – will increase to £10,200, of which £5,100 may be saved in a cash ISAs
and the remainder or entire amount in a stocks and shares ISAs
Last year saw only a £200 increase in the amount that savers could shield from tax in an ISA
, so this year's Budget will come as "welcome news", says Flavia Palacios Umana, head of Halifax savings accounts
Providing some relief for pensioners – who have had their incomes shrunk by falling interest rates – savers aged 50 and over will see this change to the ISA allowance
come into affect from October 6 this year, and all other savers will be able to increase the amount they save in an ISA from the start of the 2010/2011 tax year.
"Now is a challenging time for savers, especially for pensioners who rely on returns to supplement their monthly income," says Flavia Palacios Umana, "and we are fully behind this move by the Chancellor to help savers make more of their money in this historic low rate environment."
Meanwhile, Rumina Hassam, personal finance expert at uSwitch.com, believes that the Government's decision to wait a year before increasing the ISA allowance across the board is "just another kick in the teeth" for the majority of savers.
Research from uSwitch has found that 4.3 million have already said they intend to ditch their ISAs in the next year, and Ms Hassam thinks that today's Budget will do little to change their minds.
But, she added, "just because the limit isn't increasing immediately, it shouldn't stop consumers using the existing tax free saving benefit. These consumers have already missed out on £2 billion of tax free interest in the last year alone. As with all savings accounts
, there are still a few competitive ISA deals around."
Lee Raybould, head of Nationwide savings accounts, welcomes the news of an increased ISA allowance. "We're pleased that the Chancellor has acknowledged ISAs in his Budget and expanded this year's allowance," he said. But, he would have liked to see the Chancellor go even further.
"Linking the ISA subscription limit to inflation would provide an added incentive for consumers to save," he added, "while increasing the flexibility of ISAs would offer greater support to those consumers who need to dip into their savings or those who are currently struggling to save their full allowance."Compare ISA Deals »
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