Tax-free Isa Limit To Increase In April

As the new tax year is fast approaching, with it comes another tax free Individual Savings Account (ISA) allowance.

But this year brings some good news for the 20 million ISA savers in the UK, as the government has announced plans to increase the ISA limit.

As of 6 April, the amount savers can put away into ISAs to avoid paying tax on the interest will rise by 480 per year to 10,680.

In the Emergency Budget in June, the government had initially said that there would be a yearly increase to the ISA allowance, but there was a lot of speculation as to whether or not this promise would be kept.

However, the Treasury stayed true to its word, with plans to introduce the new limit of 10,680 for the 2011-12 tax year, up from the current limit of 10,200.

This means that savers can either put up to 5,340 into a cash ISA with the option of investing the remaining 5,340 into a stocks & shares ISA; invest up to the full amount into a stocks & shares ISA; or a combination of the two.

In October 2009, the ISA limit rose from 7,200 to 10,200 for all UK savers aged 50 and over, which became available for everyone else at the start of the current tax year.

Nationwide has introduced new bonus rates on two of its ISA accounts in order to make the offers more competitive.

The building society's e-ISA overall rate will rise to a market-leading 2.90 per cent per annum gross for balances over 1 across all ISAs opened from the beginning of this month, including a 1.15 per cent gross per annum fixed introductory bonus.

Meanwhile, the Champion ISA will also see its rate rise to 2.70 per cent per annum for balances of more than 1,000.

Nationwide expressed confidence that its packages offer some of the best ISA rates in the industry, which will appeal to those who have not yet used their full allowance for the year.

Robin Bailey, Nationwide's director for savings, said: "As one the country's leading savings providers, Nationwide is committed to looking after its savers and helping them make the most of their savings."

Last month, the firm predicted that UK consumers may begin saving more money as a result of the recent increase in VAT.

Meanwhile, the end of 2010 saw an increase in the amount of money being saved with mutuals.

People with savings accounts such as ISAs or fixed bonds at mutuals boosted their combined balances by more than 2 billion at the tail end of 2010, it has been revealed.

According to data published today (February 1st 2011) by the Building Societies Association (BSA), these balances at such institutions rose by 1.5 billion in December of last year, which followed on from an increase of 0.6 billion one month previously.

Brian Morris, head of savings policy at the BSA, commented that this shows mutauls enjoyed a "strong end to the year", but he warned that households across the UK still face a "challenging year ahead", meaning they may be forced to dip into their savings at some point in 2011.

Gross mortgage lending by mutuals slipped slightly from 2 billion in November 2010 to 1.8 billion one month later.

This comes after research by Cheltenham & Gloucester recently showed that many older people are storing cash away for their grandchildren in savings accounts.