ISAs – from April 2008

A number of changes to the Individual Savings Account will come in force on 6 April 2008:

• The annual investment allowance will be increased to £7,200.

• Of the annual investment allowance, up to £3,600 can be invested in a cash ISA. The balance of the £7,200 allowance can be invested into a stocks and shares ISA.

• Mini and maxi ISAs will cease to be recognised. Mini cash ISAs, TESSA only ISAs and the cash element of a maxi ISA will all be automatically redesignated as cash ISAs. Mini shares ISAs and the shares element of a maxi ISA will automatically become stocks and shares ISAs.

• All Personal Equity Plans will be reclassified as stocks and shares ISAs.

• Funds held in a cash ISA can be transferred to a stocks and shares ISA, but not vice-versa.

Currently, a UK resident and ordinarily tax resident individual (aged 18 or more) is entitled to invest in an ISA; those individuals who subsequently cease to be UK tax resident are entitled to retain an ISA but not to make further contributions unless, and until, UK tax residency status is resumed. Individuals aged 16 and 17 years are entitled to invest in a cash ISA only. These rules will be unchanged.

It is estimated that some 16 million people have invested £200 billion in ISAs since their introduction in April 1998.