ISA limit 'could rise to £10,000'

Friday 27th March 2009

Alistair Darling could increase the amount that can be saved in an ISA to £10,000 in next month's Budget.

From April 2008, ISA allowances were increased to £3,600 for Cash ISAs and £7,200 for stocks and shares ISAs, with an overall limit annual limit of £7,200.

However, as interest rates fall so the benefits of savings are wiped out there are widespread calls for the ISA limit to be increased further still.

KPMG is now predicting a rise in limits to £10,000 in total.

The accountancy firm in its predictions for the April 22nd Budget, expect the chancellor to up allowances to an annual limit to £10,000 with up to £6,000 allowed in cash.

The Investment Management Association (IMA) is now calling for an increase in the ISA limit to £9,600.

Mona Patel, IMA head of communications, said: "There has been a decline in the popularity of ISAs since 2004 and we are starting to see outflows.

"The government has been concentrating on pension savings of late, but we think it is a good time also for ISAs."

She added if over the last ten years the ISA limit had increased in line with inflation over the last ten years, it would now be at £9,600.

Gordon Brown has already hinted at a rise to the ISA limit – as the UK needs to start savings more, although the short term needs of the economy are for greater spending.

"We are looking at how the individual savings account can be made more attractive for the future," the prime minister said.

Ms Patel said: "Gordon Brown has clearly hinted that something will happen but not what.

"There will be some good news for savers in the Budget, but it is not sure yet what. We hope it is ISA limits."

She added increasing the ISA limit would be quick and easy, but it would not be the only way of increasing savings and further initiatives would be necessary.

KPMG has also looked at other measures that could be in the Budget.

Any hopes for a tax cuts could be dashed.

"The increases already announced to the personal allowance and basic rate band for 2009/10 will result in small tax reductions for everyone," KPMG finds.

"However, the government may conclude that they need to do more to help individuals. KPMG in the UK expects any such help to be limited in scope and concentrated on additional tax credits for those with lower incomes."

KPMG forecasts that the chancellor may increase the income tax allowances, but only for those over 65 perhaps by around five per cent to help those in that age group.

No capital gains tax changes are predicted, but an increase in future inheritance tax thresholds could come, the forecast states – although much below the controversial £1 million limit proposed by the Conservative party.

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