ISA allowances increase for over-50s on 6th October (09/2009)

Tax-free saving limits in ISAs are set to rise on October 6th 2009, but only for people aged 50 or over in the current tax year to 5th April 2010. Those under 50 have to wait until 2010 for the increases. The table below sets out the limits.

ISA Investment Limits

   * - aged 50 or over by April 5th 2010

But can I take advantage of the increases?

While the limits have increased, taking advantage of them may not be entirely straightforward. Here are some of the issues:

1. Some ISA providers are not intending to allow top-ups to the new limit due to the extra administration and system changes required. So if you've already invested some or all of your original allowance in a stocks and shares ISA and you find that your provider is not taking top-ups, you've two choices:

a) Invest the balance (up to £5,100 in total) in a Cash ISA. You can always transfer Cash ISA balances to a stocks and shares ISA at a later date, or

b) Transfer your stocks and shares ISA to a more "willing" provider, so long as penalties do not apply (see below).

2. Some fixed-rate and structured product ISAs may have required the investment to be made by a certain date before 6th October. As individuals can only invest in one stocks and shares ISA each year an alternative will need to be considered, such as the Cash ISA option shown in 1.a) above or investing outside the ISA wrapper for the time being. Transferring your fixed-rate stocks and shares ISA within the year is not likely to be a sensible option as penalties will almost certainly apply.  It is important  to seek independent financial advice before making any decisions on your existing arrangements.

If you're making regular (e.g. monthly) contributions you will need to increase your regular payment from October 6th - but only for the remainder of the tax year. Don't forget to re-set the contributions in April 2010.

What should I do next?

If you qualify for the higher limits and can afford to make the additional contributions, you should first check if your current provider will accept top-ups. Your financial advisers should know the answer already and be ready to suggest alternative solutions. But it might just be the right time to review all your ISA investments. Just call Aspira and we'll be happy to help.

Derek Miles
Managing Director, Aspira Corporate Solutions LLP, October 2009