The ISA allowance for this tax year (2014/2015) was originally £11,880, of which a maximum £5,940 could be held in a cash ISA and the remainder in stocks and shares. Or you could put the full allowance in stocks and shares.
But in his March Budget, the Chancellor announced a revamp of the ISA rules, so that from July 1, your annual allowance increases to £15,000.
As well as the bigger allowance, the great news is that you can now choose to hold it all in cash if you want to. And if you have money in a stocks and shares ISA you will, for the first time, be able to transfer all or part of your investment to a cash ISA. This might be useful if, for example, you are no longer comfortable with the risks involved in investing in stocks and shares or you now need regular access to your money.
Despite the fact the cash ISA allowance is set to almost triple, millions of savers don’t know about the impending rule changes. Research by MoneySuperMarket found that 32 million of us are still unaware that their tax-free savings allowance is set to increase.
Kevin Mountford, head of banking, said: “I am surprised that so many people are unaware of the introduction of NISAs as their launch is brilliant news for savers. Not only will they be able to switch stocks and shares into cash, a move that wasn’t possible before July 1, but the annual NISA limit is now almost three times as much as cash and a third more than the stocks and shares limit.”
Hunt out the best deals
If you’ve yet to use this year’s cash ISA/NISA allowance, don’t just plump for the account your bank offers you as rates vary a lot. Remember too that if you already have ISAs that are not competitive, you can switch to an alternative NISA provided it accepts transfers in.
The good news is, Virgin Money has just launched a range of best-buy E-ISAs which, as well as having market-leading rates, tick all the boxes for ease and transparency too. You can apply whether you are a customer of Virgin or not, they can all be opened with just £1 – and, perhaps most importantly, all accept transfers in from existing ISAs.
When it comes to easy access tax-free NISA deals, Virgin is also up there with a recently-improved Easy Access Cash ISA paying 1.5%. This deal is available on the same terms as the Fixed Rate E-ISAs.
Nationwide also pays 1.5% on an easy access basis though with its Instant ISA Saver account. Again this is open to all ISA customers with just £1 to invest and accepts transfers from existing ISAs.
If you have a FlexAccount, FlexDirect or FlexPlus current account with Nationwide however, you’ll have access to its Flexclusive ISA. This deal also provides easy access but pays higher 1.75%. However, you can’t make transfers from existing ISAs.
If you want to save more regularly, Nationwide also offers the Regular Saver ISA 2 account which pays 2.33% tax-free. You can save up to £1,250 each month into this account, enabling you to benefit from the new £15,000 limit if you invest the maximum throughout the year. Again, though this one’s only available to existing Nationwide customers.
Your existing ISA
If you have already paid into a variable rate ISA this tax year, your provider will allow you to top up your account up to the new £15,000 from July 1 until the end of the tax year on April 5.
If you’ve locked into a fixed rate account however, things are a bit more complicated. While most providers are bending the rules to allow top-ups to fixed rate accounts, they will impose different deadlines by which time you’ll need to do it.
For example, anyone who has already opened a fixed rate bond with Leeds or Skipton building societies only has until July 31 to pay in the £15,000. After this date you won’t be able to make any more top-ups until the new tax year on April 6, 2015.
For a full list of providers and their rules and deadlines read Les Roberts’ article, Can I top up my fixed rate ISA? That way you can ensure you don’t miss out on any window of opportunity – after all, the more you can save into New ISAs, the harder your money will work.
Please note: any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.