Don’t forget that everyone over the age of 16 can put money into a mini cash ISA (individual savings account).

ISAs allow you to get the interest from your savings free of tax, which means they grow faster. Also, the banks and building societies tend to pay a better rate of interest on their ISAs than on other savings accounts, so it often pays to choose an ISA even if you are not a taxpayer.

In April 2008 HM Revenue & Customs made some important changes to Individual Savings Accounts (ISAs) and Tessa Only ISAs (Toisas). Here we outline the main changes and how they affect you.

Availability

ISAs are now available indefinitely – there is no set end date.  

Types of ISAs

Mini and Maxi ISAs will no longer exist. ISA savers will be able to invest in two separate ISAs each tax year:

• a cash ISA; and
• a stocks and shares ISA.

Investment Limits

Up until 5 April 2008 the maximum investment limits were as follows:

• £7,000 per tax year into a Maxi ISA (combination stocks and shares and cash); or
• £3,000 into a Mini Cash ISA and £4,000 into a Mini stocks and shares ISA.

With effect from 6 April 2008, the new limits are as follows:

A maximum overall subscription of £7,200 per year can be invested in ISAs, of which: 

• Up to £3,600 can be invested in a Cash ISA;
• There will also be increased flexibility, as the investor can decide for themselves the balance of their investments provided they keep within the £3,600 cash limit and the £7,200 overall limit. For example, investors could subscribe £2,000 to a cash account and £5,200 to a stocks and shares account.

Transfers

You can continue to transfer your existing ISA to or from another provider subject to the terms and conditions of your current ISA provider

• There is also the additional flexibility to transfer from a cash ISA to a stocks and shares ISA (but not vice versa). You can transfer all or part of previous tax year savings. However, if you transfer current tax year savings then you must transfer the whole amount saved up to the day of transfer. Please note that these transfers are subject to the terms and conditions of your current ISA provider.
• If you transfer your current year savings from a cash ISA to a stocks and shares ISA any money saved will be treated as if you had invested that money directly in the stocks and shares ISA. For example, if you had saved £2,000 in a cash ISA and then transferred it to a stocks and shares ISA you would be able to make further investments up to £5,200 in that year. This could all be invested in stocks and shares or you could save up to £3,600 in a cash ISA and the remainder in a stocks and shares ISA.

TOISAs

These were accounts made available to holders of maturing Tessas (Tax Exempt Special Savings Accounts), the predecessor of Isas. From the 2008-9 year the Toisas no longer exist as a separate entity, and all Toisas have been converted into cash ISAs and come under the ISA rules.

In summary

To summarise the above changes from 6 April 2008: 

1. A mini cash ISA will be re-designated a cash ISA
2. A mini stocks and shares ISA will be re-designated as a stocks and shares ISA
3. A maxi ISA made up of both cash and stocks and shares will be split so that:
   -    The stocks and shares component will be re-designated as a stocks and shares ISA; and
   -    The cash component will be re-designated as a cash ISA
4. A Toisa will be re-designated as a cash ISA
5. A new overall maximum ISA investment limit of £7,200 is established, of which £3,600 can be invested in a cash ISA

CashQuestions Guide to Savings Accounts  

CashQuestions Guide to Saving for Children 

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