I am looking at maxing out my Isa limit ahead of the 5 April deadline and was wondering why the £20,000 sum didn’t rise with inflation this financial year?
I saw that Junior Isas are rising with inflation but the general Isa limit isn’t.
Additionally, I like to future plan and was wondering when the 2019/20 Isa limit will be revealed?
Isa limits: This year the amount that can be saved in a tax-free wrapper hasn’t changed
Lee Boyce, consumer affairs editor of This is Money, replies: The first question is one that has been frequently asked by our readers both via e-mail and the comments section of articles.
To answer, I’ll start with a quick history lesson of Isa limits. Under old rules, you could only place up to half of your annual allowance into a cash Isa – the remainder had to go into stocks and shares.
From 1 July 2014 savers were able to move freely between shares and cash at any time within their Isa, using a bumper £15,000 limit.
Between 1999 and 2007, the overall limit was £7,000 – and only £3,000 of this could be held in a cash Isa.
This went up to £7,200 for the next two years before reaching £10,200 in 2010/11. Before the change in July 2014, the limit was £11,520.
The current government loves an Isa, hence the launch of a number of different types and the improved flexibility between being able to split your money as you see fit.
The rise from £11,520 to £15,000 was a huge 30.2 per cent increase in the amount that could be placed in a tax-free wrapper.
In 2015/16 and 2016/17, the limit was £15,240.
In the current tax year, the limit saw another bumper increase, to £20,000 – a boost of 31.2 per cent.
These generous increases are likely to have influenced the decision to not rise the Isa limit by inflation for the next financial year.
Traditionally, September’s CPI measure would be used. That would have seen the £20,000 limit rise three per cent to £20,600.
As you pointed out, the Junior Isa limit is rising for 2018/19 – but this cap is far smaller. It will move from £4,128 to £4,260 – a rise of 3.2 per cent.
The big question now is: will the Isa limit rise for the next financial year, 2019/20?
Well the limit hasn’t remained the same for three years on the trot for more than a decade.
I asked the Treasury when savers will know when the 2019/20 limit will be set and whether it will be in the Budget later in the year.
However, it said it couldn’t comment on when this will be announced.
I also asked for an official reason behind the limit remaining flat this financial year.
A spokesperson said:’We’re committed to backing savers, and that’s why last April, we increased the amount of money people can put into an Isa to a record £20,000 every year.
‘Thanks to action we took in previous years, 95 per cent of people pay no tax at all on their savings income.’
It adds that retaining the current Isa limit follows the significant increases pointed out above in previous years.
HAVE AN ISA EXPERT QUESTION?
Do you have a burning question about Isas? Get in touch with the team with the subject line: Isa Question
THIS IS MONEY’S FIVE OF THE BEST CASH ISA DEALS