Limits on Isas remain the same until 2010

15.07.2005 Good news to millions of savers in the UK. Gordon Brown’s decision on keeping the same limits on individual Savings Accounts (Isas) until 2010 offers the chance to save over ₤500 in tax for the following five years.

Last year the chancellor removed the ten per cent tax credit from the dividends paid on stocks and share Isas. As a result many investors were discouraged from taking out Isas and the government’s aim on encouraging savings was questioned. It was planned that by 2006 limits on maxi-shares Isas would drop from ₤7,000 to ₤5,000 and from ₤3,000 to ₤1,000 for mini-cash Isas. The decision of maintaining the current limits for five more years was welcomed by savers and financial institutions. However, many expect the government to provide further protection on the limits to encourage more saving.
 
Isas are considered to be the most flexible and safe savings accounts available in the market. Invesco Perpetual, the investment fund management company, found out that 41 per cent of savers would have been less encouraged to save if the limits were reduced. Furthermore, if they rise the number of Isa savers would increase by 20 percent.
 
Although this tax free saving scheme costs the government over one billion pounds per year, it is an effective method to encourage saving habits. According to the Treasury, over 16 million people own Isas. Maintaining the limits of Isas for five more years reflects the government’s concern of promoting saving and investing.