Flexible Saving with cash ISAs

In the budget Enable’s IFA’s also note with interest that the ISA Annual savings limit has been increased again this time to £15,240 and fully flexible ISAs are going to become available from the autumn. Fully flexible ISAs will  leave savers free to withdraw cash without losing the tax advantages, provided they pay it back into the ISA before the year end. This will mean savers can treat their cash ISAs a bit like a savings account, dipping into them if they need or want to. Danny Cox, chartered financial planner at Hargreaves Lansdown says however, "The average person pays less than £4,000 into a cash Isa each year. "From April, the allowance will be £15,240, so they can withdraw money and still have plenty of allowance left."  The new Help to Buy ISA for first-time buyers allowing the Government to top-up by £50 every £200 saved for a deposit has also been put on the table.

 There is some discussion however about what will happen when interest rates do finally rise meaning some of the benefits for savers will not be long term. Danny Cox says: "If rates rose to 4 per cent, basic-rate taxpayers with £25,000 of savings would breach the £1,000 allowance, while a higher rate taxpayer would pay tax on savings above £12,500." He says “this highlights the continuing benefits of cash ISAs, especially for 40 per cent and 45 per cent taxpayers, because you will never pay income tax regardless of how much interest you earn from them.”

It is also important to remember cash ISAs are issued on an individual basis, so couples can double up their allowances. Mark Wood, chief executive at JLT Employee Benefits, says remember: "This year's £15,000 cash ISA allowance is issued per person, so couples can save £30,000 together, "And from April 6, they can each save another £15,240 in cash ISAs, making a total of £60,480 in just a matter of weeks."  In the future, only a tiny number of wealthy savers need ever pay tax on their savings interest.

Issued by: Enable Independent Financial Life Planners
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