INDIVIDUAL SAVINGS ACCOUNT
Synopsis: A brief overview of the new rules which apply from 1 July 2014 – which could in turn provide another planning opportunity to help fund for the rising costs of higher education.
Date posted: Friday, March 21, 2014
A welcome change to the current ISA investment stood out in the 2014 Budget. From 1 July 2014 a new, simpler product, the ‘New ISA’ (NISA), will be available with an overall annual subscription limit of £15,000 and greater investment flexibility.
From 6 April 2014 to 1 July 2014, contributions within the ISA subscription limits for 2014/15 can be made subject to a maximum overall limit of £11,880, of which £5,940 can be in cash. Thereafter, additional contributions will be possible up to the £15,000 NISA limit in the 2014/15 tax year. This means that an additional £9,060 can be put into a cash NISA – an increase of about 152%!
Under the new rules:
- ISAs held at 1 July 2014 will automatically convert to NISAs.
- The £15,000 limit can be invested wholly in cash, stocks and shares or any combination between the two.
- It will only be possible to have one cash NISA and/or one stocks and shares NISA in any given tax year.
- Transfers from stocks and shares NISAs to cash NISAs are permitted from 1 July 2014. Current year savings must be transferred in full whereas previous years’ savings can be transferred in whole or part, subject to the agreement of the provider.
In addition, those aged 16 and 17 will be able to subscribe up to £15,000 into a cash NISA from 1 July 2014.
Our earlier bulletin looked at the rising costs attributable to higher education and the fact that parents are finding it increasingly difficult to help fund for this – in which case maybe grandparents are a more likely target to help with funding.
With the subscription limit for 16 and 17 years old increasing to £15,000 from 1 July 2014, this provides a good planning opportunity for those whose grandchildren are likely to undergo some form of higher education.
From 1 July 2014, grandparents could gift up to £15,000 a year to a grandchild who is 16 or over to save into a NISA to help fund for these costs. While such a gift would be a potentially exempt transfer for inheritance tax purposes, part of it could be covered by the annual exemption of £3,000 (or £6,000 if the exemption was not used in the previous tax year) or other exemptions such as the normal expenditure out of income exemption.
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