Budget 2014 – Savings

New ISAs (or “NISAs”)

From 1 July 2014 the maximum amount savers can invest in an ISA each year will increase to £15,000.

ISAs will also become more flexible in their use.  Currently, savers have separate limits for the amount they can save in stocks and shares ISAs (£11,520 pa) and a cash ISAs (£5,760 pa), but from 1 July 2014, the full £15,000 New ISA (or NISA) allowance can be used to invest in a cash ISA, a stocks and shares ISA, or a mixture of the two.

This will mean savers can shelter £15,000 of new savings a year from tax.

ISAs will also be able to be offered in peer-to-peer loans and restrictions in maturity dates of securities held in ISAs will also be removed, improving flexibility further still.

Savers with existing stocks and shares ISAs will also be given the option of transferring these ISAs into cash ISAs should they prefer.

The Junior ISA and Child Trust limits will increase from £3,720 to £4,000 from 1 July 2014 too.

 

Abolition of 10% starting rate of tax for savings

At present, the first £2,790 of savings income above the personal tax allowance is taxed at 10%.  From April 2015, savers who benefit from this low tax rate will have their tax bills cut, due to two measures:

  • First, the amount of savings income taxed at this special rate will be increased to £5,000, and
  • Second, the tax rate applied to these savings will fall from 10% to 0%.

This will help low earners, and potentially take those with low incomes and a relatively modest level of savings out of paying tax altogether.

 

Pensioner Savings Bonds

National Savings will offer a new fixed rate bond for those aged 65 or over. The initial indication is that this bond will pay interest at a rate of between 2.8% gross and 4% gross, depending on the term of the bond.  However, the interest will not have any favourable tax treatment, and will be taxed in the same way as other savings income.  In addition, the bond will not be available until January 2015.

 

Premium Bonds

The maximum level of Premium Bonds a saver can hold is to increase from £30,000 to £50,000. This will be a two step increase, with the first £10,000 increase taking effect from 1 June 2014 and the second £10,000 increase being made in 2015/16.

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Nov 19

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