Financial & Legal News

New ISA limits for 2012/13

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ISA allowances have risen again for the 2012 tax year, providing an additional incentive for savers. For the 2012/13 tax year, investors are able to save up to £11,280 in an ISA. From 6 April 2011, rises in the Isa allowance had been linked to inflation but, from April 2012, increases are based on the Consumer Prices Index (CPI) for the year to the previous September.

The index-linking plan was originally announced in the Labour administration’s March 2011 Budget, and was later confirmed in June by the incoming coalition government. Subsequent speculation over the coalition’s plans to cut public spending had led to fears the annual amount available to save in ISAs would be frozen. However, despite taking the decision to cut tax relief on pension contributions, the government has continued to support investment through Isas and raise the allowance. 

For September 2011, the Office for National Statistics confirmed that CPI was 5.2%, so, once applied to the existing limit and rounded up, this equates to a rise of £600. The maximum annual contribution into an ISA in the 2012/13 tax year will therefore be £11,280.  

This can all be invested in a stocks-and-shares ISA, or up to half the amount – £5,640 – can be saved in a cash-only ISA. After investing in a cash ISA, any remaining allowance is then available for investment in a stocks-and-shares ISA.

According to the Investment Management Association, net ISA inflows in 2011 were almost £3bn and research by the trade body has consistently suggested investors would invest more if the allowance was increased. Meanwhile, according to HM Revenue & Customs, more than 15.4 million individuals subscribed to ISAs in the last tax year. This was slightly higher than the previous year, when almost 14.9 million individuals subscribed. 

ISAs are tax-efficient vehicles that allow individuals to save and invest without having to pay income tax or capital gains tax. ISAs can be a good way for people to start saving, or to add to their existing savings and investments. If you cannot afford to take advantage of the full annual allowance, it is still worth putting away what you can via a monthly savings plan, which can start from £50 a month. Do not forget one of the golden rules of ISA investing – if you do not use it, you lose it – so try and make the most of your allowance each year.

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

This blog was posted some time ago and its contents may now be out of date. For the latest legal position relating to these issues, get in touch with the author - or make an enquiry now.

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