Help for lower income savers
From 6 April, the 10% rate of tax on savings income will be abolished and replaced with a new 0% rate. The government is also increasing the amount of savings income that the new 0% rate applies to, from £2,880 to £5,000. This means that anyone with a total income of less than £15,500 will not pay any tax on their savings.
ISAs become NISAs
More dramatically perhaps, Individual Savings Accounts (ISAs) will become the 'New ISA” – or NISAs – from 1 July 2014 and the overall annual subscription limit for these accounts will be increased by almost 30% to £15,000 for the year ending 5 April 2015.
NISA savers will be able to use the full £15,000 allowance in a cash account. At the moment, only half of the current £11,880 allowance can be used as cash, with the remainder being held in stocks and shares.
All existing ISAs will become NISAs and savers with stocks and shares accounts will be able to switch them over to cash accounts.
There will be also changes to the rules on the investments that can be held in a NISA, so that a broader range of securities, including certain retail bonds with less than five years before maturity, can be invested.
Between 6 April and 1 July 2014, the total amount that can be paid into a cash ISA is £5,940. For those with a Stocks and Shares ISA, money can still be paid into that account, but the combined amount paid into Cash and Stocks and Shares ISAs must not exceed £11,880. From 1 July 2014, when any ISA will automatically become a NISA, further money can be added to either a Cash or a Stocks and Shares NISA up to the new £15,000 limit.
For those who prefer an element of excitement to their savings, the Premium Bond investment limit will be increased from £30,000 to £40,000 and will offer two £1m monthly prizes instead of one. This change will come in on 1 August, with a further increase to £50,000 investment limit planned for 2015/16.
For help with maximizing your use of your tax allowances before the end of the tax year on 5th April, contact Doug by email or on 0115 950 3044.