New ISA rules

The Budget has revamped rules for Individual Savings Accounts, but what are the new ISA rules?

From 6th April 2014, the ISA allowance will rise from £11,520 to £11,880.

As with current ISA rules, for the 2014/15 tax year it will be possible to hold up to half of the total ISA allowance (so £5,940) in a cash ISA and then any unused balance up to £11,880 (less what you have put in a cash ISA) in a stocks and shares ISA.

The Budget announcement means that, from 1st July 2014, the New ISA limit will rise to £15,000.

All of this £15,000 can be invested in a New Individual Savings Account (NISA), either as cash, shares or ‘combined’.

The new ISA rules mean that investors can choose to invest solely in cash, solely in investment funds, or pick and choose within their NISA, the ‘combined’ route.

From 1st July 2014 you might decide to invest £15,000 in a cash NISA, £15,000 in a stocks and shares NISA, or £15,000 in a combined NISA.

Alternatively, you could invest some of the £15,000 NISA allowance in a cash NISA and some in a stocks and shares NISA. The new ISA rules offer a great deal of flexibility.

The new ISA rules means that it will be possible to transfer existing ISA assets from investments to cash for the first time. Under current ISA rules it has only been possible to transfer from cash to stocks and shares.

You should check first with your cash ISA provider to ensure they will accept the transfer and follow their process carefully, as if you sell your ISA holdings and reinvest them, you will remove them from the tax efficient environment.

ISAs from previous tax years can be transferred to NISAs from 1st July 2014.

Also increasing on 1st July is the Junior ISA limit, up to £4,000 from the current £3,720.

The new ISA rules also mean a slightly wider range of investment options become available. This includes loans made through peer-to-peer lenders within a NISA.

HM Treasury has published a very useful two page factsheet about the new ISA rules here:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293746/Fact_sheet_ISA_8.pdf

We believe that these new ISA rules are a welcome announcement for savers and investors, allowing more people to plan for the future in a tax efficient manner.

If you require any advice about the new ISA rules or managing your NISA portfolio, do get in touch.