ISA success to be bolstered by reforms

by Gill Montia

Story link: ISA success to be bolstered by reforms

In a report entitled “Individual Attitudes to Saving” the Government has highlighted the success of Individual Savings Accounts (ISAs).

The tax incentives offered through ISAs are such that one-third of UK adults have take out this kind of savings plan and according to Kitty Ussher, the Economic Secretary to the Treasury “This research helps to confirm the success of ISAs in encouraging people to save, enabling them to build up a financial asset.

ISAs were launched by the Government in 1999, replacing TESSAs and PEPs, and are not liable for either income or capital gains tax.

Up to £7,000 can be invested in any tax year and the funds can either be entirely in shares or split: up to £3,000 in cash and the rest in shares.

According to Ms Ussher, in 2008 the Government “will be introducing reforms to build on that success … we will make ISAs simpler to use, more flexible, and more generous with a higher investment limit.”

The reforms are due to come into effect in April 2008, when the allowance for a tax year will increase to £7,200, and the cash portion allowance will increase to £3,600.

In addition, savers will be able to transfer some or all of the money saved in cash ISAs from previous tax years into stocks and shares ISAs, without affecting their annual allowance.