ISA contribution limit to be increased by 2.1 per cent

Business banking news review: week ending 6 Dec 2012

Next April contribution limits on ISAs will be increased by 2.1 per cent, according to Chancellor Osborne’s recent Autumn Statement.

From April of 2013, the new ISA limit will be £11,520, a positive increase of £240 from the current tax year’s limit of £11,280. Tax-free ISA savings accounts – which are always capped at 50 per cent of the total – are likewise increasing by £120 to £5,760, though stocks and shares ISAs can have the entire allowance invested in them.

Chancellor Osborne, in his Autumn Statement, remarked that the Government may also considering direct AIM share investment within ISAs. Allowing investment in smaller company stocks may lead to increasing enterprise, the chancellor added.

However, calls to allow the entire ISA contribution limit to be invested into a cash ISA fell on deaf ears, despite calls from many to allow it. Allowing savers to invest 100 per cent of their contribution into such a tax-free savings account would give an income boos to savers both young and old and reinvigorate the entire savings sector, some economic experts in favour of the change have said, and many building society executives had allied themselves with these financial experts in agreeing that providing higher amount of tax-free saving could counteract the free-fall interest rates have been in for so very long, and some research has said that those with cash ISAs are losing some £557 million per annum in lost interest due to the Funding for Lending scheme introduced by the Chancellor last July.

Yorkshire Building Society representative, Tanya Jackson, commented on the Chancellor’s announcements, calling it a disappointment that the disparity between stocks and shares ISAs and cash ISAS was not addressed by Mr Osborne. These restrictions placed on anyone wishing to invest in a cash ISA disadvantages those who have the financial wherewithal to risk their entire contribution limit on stocks and shares investment, added Ms Jackson.

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