In October 2009 the UK government introduced new contribution limits for ISA (Individual Savings Account) investors. From 6th October 2009, those aged over 50 can invest up to 10,200 GBP in an ISA. Up to 5,100 GBP of this could be invested in to a Cash ISA. For those that are under 50 years of age these rules will apply from 6th April 2010. Until then the old rules will remain in place.
This marks a significant increase to the contribution limits for ISA investors. The ISA was introduced in April 1999 when the original limit was 7,000 GBP. It was then increased by just 200 GBP to 7,200 GBP in April 2008 after some nine years of waiting for the contribution limits to be increased.
However it is thought that even this seemingly nominal increase was just to make it easier for investors to put away the round number of 600pm GBP into an ISA, rather than the unusual looking 583 GBP. So this new increase should be seen as the first real increase to the limits in over 10 years. Why now? Well the government wants to encourage UK investors to put money away for their future and be more financially sound with their money. Investing in an ISA can help you achieve this.
Other than the personal pension no other product on the market can offer such a wide choice of investments as well as such generous tax incentives. Not having to pay capital gains tax on your investment profits or not having to pay income tax on your savings cannot be underestimated.
By maximising the use of your annual ISA allowance you can build up a substantial sum of money held within this tax advantaged product. So unless you have a larger portfolio there is no reason why any of your assets should be held outside of an ISA and potentially subject to capital gains tax when they don’t need to be. So if the government is extending their generosity by increasing the ISA limits then it should certainly be a decision that all investors are happy about.
Please note that all tax bases, levels and reliefs are subject to change at any time and are dependent on individual circumstances.
Jaskarn Pawar, Director, Investor Profile Ltd.
If you are a UK investor with ISA, Personal Pension or Unit Trust investments then Investor Profile’s free online investment monitoring service could be what you need.
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