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Contributed by ACCA, in their own word

Changes will make ISAs more flexible and increase the annual subscription limit. 

From 1 July 2014, Individual Savings Accounts (ISAs), including junior ISAs and Child Trust Funds (CTF), will be more flexible and will also have an increased annual subscription limit. The new measures are being brought in on 1 July, rather than 6 April to allow ISA managers and providers time to prepare for the changes.

The current rules are set out in the Individual Savings Account regulations 1998 (SI 1998/1870) and they set out the maximum amounts that can be subscribed. The overall limit for an ‘adult’ ISA for 2013/14 is £11,520, only 50% of which can be subscribed to a cash ISA. The balance has to go into a ‘stocks and shares’ ISA. The maximum subscription for a junior ISA for 2013/14 is £3,720.

The rules for CTF are set out in the Child Trust Fund Regulations 2004 (SI 2004/1450) and set a maximum limit of £3,720 for 2013/14. The new limit will for junior ISAs and CTFs will be £4,000 from 1 July 2014.

From 6 April until 1 July 2014, the maximum that can be paid into a cash ISA is £5,940, and the combined total that can be paid into cash and stocks and shares ISAs is £11,880. But from 1 July 2014, additional payments can be made into cash or stocks and shares New ISAs (NISAs) in any combination, as long as the total annual limit of £15,000 is not exceeded. Any amounts that are paid in between 6 April and 1 July will count towards the annual £15,000 NISA limit.

The other changes that make the NISA more flexible than the ISA are:

  • there will be no prevention of ‘cash like’ investments in stocks and shares
  • transfers will be permitted between cash and stocks and shares NISAs
  • there will be no flat rate charge on any interest arising on un-invested cash in a stocks and shares account
  • securities with less than five years to maturity when they are first held in the account will now be permitted as part of a stocks and shares NISA
  • it will be permitted to hold certain Core Capital Deferred Shares issued by a building society in a stocks and shares NISA.

The government also intends to consult on how to enable peer-to-peer loans to be held within a NISA.

Savers between 16 and 18 can have a cash NISA, but not a stocks and shares NISA, and can utilise the £15,000 limit, in addition to any junior ISA held. From 1 July 2014, savers can chose to have a single NISA for cash and stocks and shares, but can also continue with separate accounts if they prefer.

From 1 July 2014 a saver can transfer between cash and stocks and shares NISAs as often as he or she chooses. However, savings paid into a stocks and shares ISA after 6 April 2014 but before 1 July 2014 can only be transferred to a cash ISA as a whole;  though savings paid in before 5 April 2014 can be transferred to a cash ISA in whole or in part, as long as the ISA provider allows part transfers.