Chancellor George Osborne announced several major changes to the ISA system in his Budget speech for 2014, paving the way for millions of British savers to benefit.
The New Individual Savings Accounts (NISAs) will allow more people to save without the need to pay tax – as up to £15,000 can now be placed into one as either cash or shares.
This will be possible from 1 July 2014, and represents an increase on the current limits of £5,760 a year that can be invested into a cash ISA and the £11,520 limit for investing in stocks and shares.
According to the government, more than six million savers stand to benefit, with investors also able to transfer money – in the form of cash, stocks or shares – from previous ISAs into NISAs.
Several leading banks have already welcomed the news, including the Halifax and the Nationwide Building Society.
NISAs will “reduce confusion on the differing amounts which could be saved in cash and stocks and shares, and more importantly give people more flexibility to earn tax-free interest”, according to Graham Beale, the chief executive of Nationwide.
The total amount that can be placed in a Junior ISA or Child Trust Fund has also increased, with the new limit of £4,000 up from the previous one of £3,720.
Meanwhile, the 10% tax rate in savings will also be scrapped, meaning one million savers will no longer pay.
The rate applied to the first £2,790 of savings income that was above the personal allowance, although that will now change.
A boost to premium bond holders
At the same time, the cap on Premium Bonds will also be raised – for the first time in a decade – so that savers can hold up to £40,000 in Premium bonds from 1 June 2014.
That figure will increase even further in 2015 when it goes up to £50,000, while the number of £1m Premium Bond prizes will increase to two, although the total prize pot will stay the same.
The new changes seem to offer good deals for many savers across Britain, especially those in the older generations.
An increase to the personal allowance with regards to income tax will also provide welcome relief to the working generations, as the limit before tax is due to increase to £10,500 from April 2015.
The figure is already going to rise to £10,000 for the 2014-15 tax year and Mr Osborne believes the new change will take an additional 288,000 people out of the income tax bracket for 2015-16.
Approximately 25 million taxpayers could stand to benefit, saving an average of £100 a year each.
Taking good care of money
Financial management will still remain an extremely important part of life as people look to ensure they don’t spend more than they would like.
A prepaid card limits spending to the amount on the card at any given moment and is not directly linked to a bank account, making funds safer.
The cards can easily be topped up or replaced if required, while accounts can be checked regularly online if necessary.