Finance Bill Tracking Service 2010 | Budget 2010

BN28 INDEXING INDIVIDUAL SAVINGS ACCOUNT LIMITS FROM 2011

Who is likely to be affected?

1. All individuals who invest in Individual Savings Accounts (ISAs).

General description of the measure

2. From April 2011 and over the course of the next Parliament, the ISA limits will be increased in line with the Retail Prices Index (RPI) on an annual basis.

Operative date

3. Indexation of the ISA limits for the tax year 2011-12 will have effect on and after 6 April 2011. Indexation of the ISA limits for subsequent tax years will have effect on and after 6 April of each year.

Current law and proposed revisions

4. Under the powers in section 694 of the Income Tax (Trading and Other (Income) Act 2005 (ITTOIA), The Individual Savings Account Regulations 1998 (Statutory Instrument 1998/No 1870 as amended) provide the rules and regulations for the ISA scheme.

5. As announced at Budget 2009, from 6 April 2010 the ISA annual subscription limits are being increased for all savers, to £10,200, of which £5,100 can be saved in cash.

6. From 6 April 2011 and over the course of the next Parliament, the annual ISA limits will increase annually in line with RPI. The new annual limits will be rounded to the nearest multiple of 120 so that individuals who save monthly will be able to calculate their monthly savings more easily.

7. The new limits will be calculated by reference to the RPI for the September before the start of the tax year, and HM Revenue & Customs will announce the new limits as soon as possible after the RPI figure is published, and at least four months in advance of the start of the new tax year in which they will apply.

8. In the event that RPI is negative, the ISA limits would be unchanged.

9. As is the case now, following indexation, the cash ISA limit will be half the value of the stocks and shares ISA limit.

10. The ISA regulations will be amended by statutory instrument to reflect these changes.

Further advice

11. If you have any questions about this change, please contact Stephen Lig on 020 7147 2827 (email: steve.lig@hmrc.gsi.gov.uk). Information is also available from the Individual Savings Account (ISA) Helpline on 0845 604 1701. Information about Budget measures is available on the HM Revenue & Customs website at www.hmrc.gov.uk