ISA limits update

Newsletter issue - March 2018.

The maximum annual investment limit for Individual Savings Accounts (ISAs) will remain at Â£20,000 for 2018/19 (of which, for eligible investors, Â£4,000 may be saved in a Lifetime ISA). Although the investment limit is not rising in the new tax year, a couple will still be able to add up to Â£40,000 to their ISA accounts during the year - a substantial investment limit - and the interest received will be tax-free.

The maximum investment limit for Junior ISAs will rise from 6 April 2018 to Â£4,260, so there is scope for parents and grandparents to make tax-free savings investments on behalf of their children/grandchildren. Since it is possible for children to hold both a Junior ISA and a Child Trust Fund (CTF) (the CTF investment limit for 2018/19 is also rising to Â£4,260), there is plenty of scope for investors to look for higher-yielding products.

Help-to-buy ISAs continue to be available to assist first-time buyers save a deposit to purchase their first home. Under this relatively new scheme, up to Â£200 a month may be saved (along with an initial deposit of Â£1,000, and up to a maximum of Â£12,000) and, subject to certain conditions, the government will provide a 25% boost to the savings up to a maximum of Â£3,000 per person. A couple buying together could therefore save up to Â£30,000 tax-free towards the purchase of their first home, but it will take around four and a half years to achieve this level of savings using the Help-to-buy scheme.

Lifetime ISAs can be used by people aged between 18 and 40 to save for a first home or later life (again, subject to certain conditions). A total of Â£4,000 may be invested each year until aged 50. The Government will add a 25% bonus to savings, up to a maximum of Â£1,000 a year.

Unfortunately, the Government has recently confirmed that the new Help-to-Save scheme will not be fully available until October 2018. Ministers had originally said that the new accounts would start 'no later than April 2018' but this is not to be the case. This new type of account is designed to encourage people on low incomes to save for a rainy day by offering a 50% government top-up on savings. Over time, eligible individuals should be able to save a total of Â£2,400 in qualifying accounts, and receive bonuses of up to Â£1,200.