Budget: Isa limit rises to £7,200

Savers have been given a boost after Gordon Brown announced an increase in the limit that can be invested in Isa accounts.

In today’s Budget announcement, the Chancellor said the limit from April 2008 would be £7,200.

He also announced an increase in the cash limit to £3,600 in a bid to encourage further saving.

This will benefit around five million people who are currently making full use of either their cash or overall investment limits.

The government also says it will extend the reform to allow transfers from cash into stocks and shares to include all cash held in ISAs, not just that subscribed in previous tax years.

However, the rises are not expected to be met with too much euphoria, as experts argue a larger increase is needed.

Campaigners have been urging Mr Brown to raise the limit above £8,000 to compensate for tax rises elsewhere and the effects of inflation since Isas were introduced in 1999.

Isas have been successful in meeting the Government’s objective of improving the nation’s savings habits.

Over 17 million people now have an Isa, with over £220bn subscribed since their launch as a replacement for tax-exempt special savings accounts (TESSAs) and personal equity plans (PEPs).

Isa and Pep savings are supported by an estimated £2.1bn each year in tax relief.

Investors are currently allowed to shelter up to £7,000 in a shares Isa, or £3,000 cash into a mini Isa, with the option of adding a further £4,000 in equities.

At the same time, the capital gains tax limit for individuals is being increased from £8,800 to £9,200 or £18,400 for couples.

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