Page last updated at 13:41 GMT, Wednesday, 22 April 2009 14:41 UK

Isa allowance rising to 10,200

Piggy bank
The chancellors announced a rise in the Isa limit

Savers over 50 will have the chance to top up tax-free savings in Individual Savings Accounts (Isas) from October.

The annual limit will go up from £7,200 to £10,200 from 6 October for those over 50 years old and for everyone else from April 2010.

The cash limit in the overall allowance will rise from £3,600 to £5,100. The remainder can be invested in shares.

There are about 18 million Isa account holders in the UK, with five million using the full allowance each year.

Changing times

This is not a case of tinkering around the edges
Christine Ross, Savings and investments expert

Isas were introduced 10 years ago by then-chancellor Gordon Brown in an attempt to encourage UK residents to get into the savings habit.

Some BBC website readers have already been asking about the changes and how it would affect them.

The current limit is £7,200, with a maximum cash investment of £3,600. This will go up to £10,200, with half of this as a cash investment - costing the Treasury a total of £60m by 2011-12.

The move has been welcomed by savings and investments expert Christine Ross who told the BBC that this was a bold move.

"This is not a case of tinkering around the edges. For a lot of people a great deal of their savings will now fall outside of the tax net," she said.

But the benefit to savers will be relatively limited if interest rates fail to rise from their current low levels, according to David Black of Defaqto.

BUDGET 2009

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At the best interest rates being offered at present, the increase gives additional tax-free interest of £54.15, he said.

Brian Morris, head of savings at the Building Societies Association (BSA), said there was some breathing space for the providers of Isas to administer the changes.

"We will be checking with our members that six months is sufficient," he said.

"The increase in the limit is very welcome and something that we lobbied for. However, we would have preferred for this all come into force in one go."



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