From ISAs to NISAs: Changes to Tax-Free Savings

Sep 9, 2014   //   by Keith McDonald   //   Savings Guide  //  Comments Off on From ISAs to NISAs: Changes to Tax-Free Savings

On 1st July 2014, the new ISA was launched, which could make a huge difference to millions of savers. Let’s find out more.

ISAs, or individual savings accounts, allow people over the age of 16 to save a certain amount tax free every year.

Change 1

On July 1st, ISAs became New ISAs (or NISAs) and the annual allowance rose from around £5,000 per year to £15,000 per year.

Change 2

Previously, savers were only allowed to save half of this allowance in cash. The rest had to go into stock or investment ISAs, which carry greater risk.

 Now, savers can invest any combination of cash or stocks, up to the maximum limit. This means that for the first time, savers will be able to invest their entire allowance in cash.

Change 3

Savers will also have more flexibility over the control of their ISA categories. Previously, it was possible to transfer cash ISA funds into a stock ISA, but not the other way around. That has now changed, and savers can now move their funds freely in both directions.

Savers will also be able to hold cash tax-free within a new stock ISA, whereas previously it was taxed if it wasn’t invested within a certain time period.

Certain aspects of the new ISA will remain the same, so it’s worth re-emphasising these as well.

Staying the Same: 1

Firstly, you can only pay into one of each type of ISA in any given tax year.

Staying the Same: 2

Secondly, you can still transfer your ISA if you’re not happy with the rates you’re receiving. Make sure that you request this transfer from the new provider, as this will keep your funds tax free.

(If you’ve already subscribed to a fixed-rate ISA this term, check with the provider to see if there’s a chance to top this up, and when the deadline is for new contributions.)

Staying the Same: 3

Thirdly, your annual allowance will not roll over to the following tax year, so invest what you can before this point, as any unused allowance gets lost forever.

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