New ISA Rules – October 2009

Well ISA day has finally arrived and the contribution limits increase today for those people aged over 50 before 5th April 2010.

What is the current ISA position?

Anyone aged over 18 in the current tax year is allowed to contribute up to £7,200 to a Stocks and Shares ISA. If they choose, they can use up to £3,600 of this allowance to contribute towards a Cash ISA.

Any unused allowance after making contribution to a Cash ISA can be invested in a Stocks and Shares ISA.

For example, if someone currently places £2,000 into a Cash ISA, before the end of the tax year on 5th April they can either invest an additional £1,600 into their Cash ISA, and invest £3,600 into a Stocks and Shares ISA. Or alternatively, they could leave just £2,000 invested in the Cash ISA and invest £5,200 into a Stocks and Shares ISA.

What is changing on 6th October 2009?

The annual allowance for anyone aged 50 or over before the end of the current tax year is having their ISA allowance increased to £10,200. Of this £10,200 allowance up to £5,100 can be invested in a Cash ISA.

What about for those aged under 50?

For under 50’s their ISA allowance will remain at £7,200 for the rest of the current tax year and their allowance will increase on 6th April 2010 to £10,200 in line with the over 50’s allowance.

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