I have been reading many articles recently about the changes in the ISA allowance and ISA limits coming about over the next 6-7 months so I thought I would summarise them in a nutshell and answer a few of the more common questions and enquiries we are receiving about the ISA limits increase in the 2009/2010 tax year.
What are the current ISA limits / ISA allowances in the 2009/2010 tax year?
In the current tax year anyone over age 18 can invest up to £7,200 in a Stocks and Shares ISA.
Of this £7,200 ISA limit, up to £3,600 can be invested in a Cash ISA, any of the remaining £7,200 allowance which remains unused can be invested in a Stocks and Shares ISA.
What is changing on 6th October in relation to ISA allowances?
From 6th October, anyone who will be aged 50 or over, before the end of the current tax year on 5th April 2010, can invest up to £10,200 into a Stocks and Shares ISA.
Of this £10,200, up to £5,100 can be invested in a Cash ISA, with any remaining unused ISA allowance being available for investing in a Stocks and Shares ISA. For example – if you invested £2,000 in a Cash ISA you could still invest £8,200 in a Stocks and Shares ISA.
What about if you will be aged under 50 by the end of the tax year on 5th April 2010?
In these circumstances, your ISA allowance will remain at £7,200 until 5th April next year, with you being able to invest the full £10,200 from 6th April 2010 for the 2010/2011 tax year.
I have already paid some money into my ISA (up to £7,200) – can I top it up after 6th October?
This will depend on the institution you are invested with – we suggest you ask them whether they will allow you to invest the additional amount up to £10,200 (or £5,100 in the case of Cash ISA’s) after 6th October.
Under current rules you cannot contribute to an ISA of the same type with more than one provider. Therefore, if your bank/building society etc is not willing to allow the additional investment you may have the option to transfer to another provider and make the additional investment.
You need to confirm with your current ISA provider whether they will allow the top up – if not, you need to find a provider who will accept a transfer in from the current provider as well as allowing you to top up.
Under no circumstances should you “cash in” an ISA if your current provider won’t allow the top up, as you will not be able to reinvest this amount in the current tax year – to move money from one ISA provider to another you need to complete an “ISA Transfer form” from your new ISA provider.
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