Government expected to hike ISA limit to 30,000 a year

Government expected to hike ISA limit to 30,000 a year

The government is expected to hike the ISA limit to 30,000 a year, as ministers are said to be looking at expanding the savings rules. ISAs can be deposited in the bank each year without paying tax on any interest or income derived from the savings account. There is a possibility that Chancellor Jeremy Hunt is considering an additional allowance for ISA savings investment in firms listed on the London Stock Exchange. Path Financial's founder, David Macdonald, said an increase to the allowance is arguably 'overdue' as the last one was in April 2017. He added: 'It's not easy to argue with you, but it's a difficult thing to do,' he said.

He encourages people to use their ISA allowance because the current high interest rates mean that savers are more likely to pay tax on their other savings. A basic rate taxpayer can earn up to £1,000 in interest and not pay tax, down to £500 for higher rate earners and zero for those on the additional rate. Even a fifth of the interest goes up as a basic-rate tax-payer, so it means you have to pay attention and use the ISA allowance, Macdonald said.

Since allowances on capital gains tax and dividends have fallen in recent years, it is now a crucial factor in safeguarding investments in an ISA. All savers would benefit from reduced tax rates by using a higher ISA allowance. Shawbrook savings head Adam Thrower, said changes to ISA policy could be a big boost for savers if done right.

Data from CACI showed that in April 2023, more than three million non-ISA savings accounts were liable for tax on savings, a huge increase from just 257,000 a year earlier, due to frozen personal tax thresholds. Shawbrook saw a surge in customer opening ISAs, with a 73 percent increase in people opening cash ISAs in the first five months of this year compared to the same period last year. Funds deposited in cash ISAs increased 55 percent from January to May 2023 compared to last year.