New Rules for ISAs: What You Need to Know

The government often makes changes to the limits and regulations for savers, and Budget time is the moment for reform to be pushed through. The changes apply to savers all over the country but perhaps those in London should pay particular attention to the benefits of the new ISA savings regime - the percentage of adults who have ISAs is smallest in London (along with the North East) at 45.4 percent, according to data from HM Revenue & Customs. Here’s what you need to know about the new ISA limits and legislation.
 
Overall Savings Limit and Product Packaging 
 
The government announced that from 6 April 2014 the overall limit for ISA savings will be increased from £11,520 to £11,880. And within this, £5,940 can be invested in cash. In addition to this change, the government reported that a new product will replace the ISA – predictably called the New ISA (NISA). Following 1 July 2014, current ISAs will convert to NISAs. From this point onwards, the annual limit will increase to £15,000. At this time, you will be allowed to subscribe this entire amount to cash (currently you can subscribe around 50 percent.) The NISA is designed to be a simpler product because it combines cash, stocks and shares with equal limits for all three. The biggest change is you can decide to have all your savings in cash or you can continue with the old procedure of splitting your subscription between cash, stocks and shares.
 
Run-Up to July 2014
 
There are different ways to keep your investment within the ISA system after 1 July 2014. You can hold cash in a tax-free Stocks and Shares NISA if the provider allows this. Although many people will want to hold separate accounts for their savings in cash, stocks, and shares. In the run-up to July 2014 the total amount of money you will be permitted to put into a cash ISA will be £5,940. You can also pay into a stocks and shares ISA so long as the combined amount between the cash and the stocks and shares does not exceed £11,880. After 1 July you have more flexibility so that you can transfer more money up until the new limit.
 
Transfers Between Accounts
 
From July onwards you can transfer any money that you already have existing in a Stocks and Shares ISA into a new cash NISA. You should arrange the transfer through your providers because if you take out money yourself in order to deposit it into the NISA, it will count as a new payment against the overall limit.
 
Different transfer limits apply and not all providers allow part transfers. The overall procedure can be confusing. If you have questions related to ISAs, individual savings accounts, or business savings and regulations, contact professional accountants in central London at www.gsmaccountants.co.uk for more information and for other accountancy queries and procedures.
 
Sources:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/293746/Fact_sheet_ISA_8.pdf http://www.hmrc.gov.uk/statistics/isas/statistics.pdf

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