£3,000 ISA increase for savers over 50

From 6 October, anyone over 50 will be able to stash an extra £3,000 in their tax-free ISA (Individual Savings Account). Victoria Bischoff explains...

On 6 October, the annual ISA (Individual Savings Account) allowance will increase from £7,200 to £10,200 for anyone aged over 50.

This means anyone who is due to turn 50 by April 5 2010 will be able to invest an extra £3,000 tax-free.

Those who are eligible will be able to save up to £5,100 in cash and the remainder in stocks and shares.

Meanwhile, the rest of us will have to wait until the start of the new tax year in April 2010 for the new ISA limit to come into effect.

What does this mean?

With times tough and the Bank of England base rate at an all time low, this is fantastic news for savers.

Basic rate tax payers usually lose 20% of the interest they earn on savings, while higher rate tax payers have to hand over a whopping 40%.

But by stashing your cash in an ISA, you will receive 100% of the interest you make on your investment - helping your money tree to grow faster.

However, be aware that you cannot open more than one Cash ISA in the same tax year.

This means you must either top up your existing ISA (if they will allow you to) or transfer the ISA you opened this year to a new provider.

Never simply withdraw your money yourself or it will lose its tax free status and you won't be able to reinvest it.

Remember, if in doubt, it's a good idea to seek advice from an Independent Financial Adviser or your provider.

You can read more about how to ISAs work in Laura Starkey's article 'Why you need an ISA'.

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