With much speculation about the reduction in ISA limits, we thought a quick refresher of the limits for the current year and the next two tax years was in order.
In the current tax year (2004/2005), the maximum investment into ISAs is £7,000. This can be invested into a Maxi ISA, of which a maximum of £3,000 can be held in cash. Alternatively, £3,000 can be invested into a Mini Cash ISA, £3,000 into a Mini Stocks and Shares ISA and £1,000 into a Mini Insurance ISA.
For the next tax year (2005/2006), the maximum investment into ISAs is still £7,000. Again, this can be invested into a Maxi ISA, of which a maximum of £3,000 can be in cash. Alternatively, £3,000 can be invested into a Mini Cash ISA and £4,000 into a Mini Stocks and Shares ISA. As you can see, the Mini Life Insurance ISA has been done away with.
Finally, for the tax year (2006/2007), the maximum investment into ISAs will reduce to £5,000. This can be invested into Maxi ISA, of which a maximum of £1,000 can be in cash. Alternatively, £1,000 can be invested into a Mini Cash ISA and £4,000 into a Mini Stocks and Shares ISA.
Our View
The Government is definitely pushing savers towards stocks and shares, over cash. This can be seen by the reduction in the cash limits, rather than stocks and shares.
We believe the reduction will be detrimental to all savers and the Government risk falls in saving volumes overall. The removal of the life insurance ISA is not a surprise. The maximum investment was £1,000 per year and only a handful of providers offered them. Obviously, they were not cost effective to run.