Keeping this year’s 7000 pound subscription limit for a further year will give savers the chance to save more free of tax, Chancellor Gordon Brown announced today.
ISAs have got off to an excellent start. The Chancellor made his announcement as Inland Revenue figures showed that around 17.3 billion pounds had been put into ISAs during their first nine months. This is an increase of around 40 per cent on the estimated 12.2 billion pounds put into PEPs and TESSAs in the same period last year.
The Chancellor intends that this success should be built on while ISAs are still in their relatively early days. The measures announced mean that the previously planned reduction in the ISA limits to 5000 pounds for 2000-2001, will be deferred, giving people the opportunity to save more tax free, and to get used to this new and successful scheme.
With ISAs coming up to the end of their first year, the Chancellor also announced a review of their first year of operation. The Inland Revenue will be discussing what lessons can be learned and whether any adjustments are needed to help them run more smoothly.
Commenting on his Budget announcement Mr Brown said :
“ISAs have really caught the imagination of those wanting to save. They have already saved over 17 billion pounds in ISAs in just nine months. Nearly 6.7 million accounts have been opened.
That is very encouraging but we wish to see still more being saved. The measures I have announced today will give what is already a successful scheme a further boost, resulting in even more tax free saving.”
1. For the tax year 1999-2000 savers can subscribe up to 7000 pounds overall of which no more than 3000 pounds may go into cash and 1000 pounds into life insurance. Originally these limits were going to be reduced for the tax year 2000-2001, and later tax years, to up to 5000 pounds overall of which no more than 1000 pounds could go into cash. This planned decrease in the limits will now be deferred until the tax year 2001-2002.
2. The review of the operation of ISAs will begin work in April 2000, after ISAs have had the chance to be up and running for a whole year. The review will involve discussions with representatives of the savings industry and look at such operational issues as :
– resolving any problems encountered during that first year of operation;
– the possibility of bringing PEP rules on issues like qualifying investments and phone instructions into line with the more flexible rules for ISAs.
3. The ISA take up figures for the nine months from 6 April 1999 to 5 January 2000 show:
– around 17.3 billion pounds paid into a total of nearly 6.7 million ISA accounts during that period;
– over 8.5 billion pounds paid into mini ISAs, including:
– almost 7.7 billion pounds into cash
– over 820 million pounds into stocks and shares
– around 34 million pounds into life insurance
– over 8.7 billion pounds paid into maxi ISAs, including:
– over 8.2 billion pounds into the stocks and shares component
– over 500 million pounds into the cash component
– around 10 million pounds into the life insurance component.
4. The amount put into stocks and shares over the nine month period exceeds that put into cash. This was not the case after the first three or six months.
5. These figures show an increase of around 4.6 billion pounds and 1.5 million accounts over the figures for the previous account 6 July to 5 October 1999. The figure of 4.6 billion pounds also exceeded significantly the figure of 3.2 billion pounds for subscriptions to PEPS and TESSAs in the comparable quarter last year.
NOTES FOR EDITORS
1. The cost of the retention of the existing ISA subscription limits of 7000 pounds for a further year will be 40 million pounds in 2000-2001 and 70 million pounds in 2001-2002.
2. Early consultation will take place with representatives from the savings industry on the extent of any additional administrative costs arising out of the deferral of the planned reduction in ISA subscription limits.
3. Draft regulations retaining the current ISA limits for a further year were laid before the House of Commons today. The change in the limits will be available from 6 April 2000. The new regulations are the Individual Savings Account (Amendment) Regulations 2000. They will be available from The Stationery Office Limited shortly, and will also at the same time be posted on in the Inland Revenue website.
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