ISA Limits Increased

The amount of money that can be saved in a tax free ISA was increased on the 6th of October for those aged 50 and over. The rest of us will see our ISA allowance increase at the beginning of the new tax year in April 2010. The new top limit is £10,200 half of which can be cash with the other half being shares:

A cash component: a cash deposit that is similar to any other ordinary savings account, apart from the tax-free status. A TOISA must consist solely of a cash deposit.

A stocks and shares component: the money is invested in ‘qualifying investments’ consisting of any combination of stock market equity investments (with no geographic restriction), public debt securities such as government or corporate bonds, or cash “awaiting investment”. As a consequence, the risk profile of the ISA may be anything from low to high. The investments may also include or consist of property funds or derivatives such as options. This element may be self-invested and managed through a stockbroker, but the majority of investors invest collectively through a collective investment such as a unit trust, OEIC or investment trust.

The limit has risen from £3600 per year cash allowing us to save an extra £1500 tax free. Unfortunately 40% of Britons feel unable to save. Those who can save may not see a great deal of benefit in having their money in a low-interest ISA rather than a standard savings account. Still an ISA is a good way of saving and keeping the dreaded tax man at bay.

Today it was reported that the country is still in the grips of a recession much to the surprise of most. The nation’s economy contracted by 0.4% between July and September which was the sixth consecutive quarter to see a reduction.

As the graph above shows the GDP has reduced by less this quarter but the fact that there was a reduction means that this is the longest recession we have witnessed.

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