UK savers to benefit from increase to Isa limit

Savers will be happy to learn that the Individual Savings Accounts (Isa) allowance will be rising next year.

The rise is expected to see the Isa limit go up from the current level of £10,200 per year to £10,670, which will come into force at the beginning of the next financial year (April 2011)

The news comes after this years increase from £7,600 to £10,200 which was announced in last years budget and came into force from October 2009 for all saver aged 50 and above, and everyone else at the beginning of this tax year.

Savers can only save half of the total Isa limit in cash Isas with the remainder available for stocks and shares isas, or the full amount into stocks and shares isas.

There are currently over 20 million savers in the UK with a tax-free Isa.

Stocks and shares Isas have become increasingly popular with savers seeking a higher return on their savings, especially as many savings accounts are offering measly rates after the base rate has remained low. This is despite the risks involved when dealing in these types of investments.

"With rising taxes, savers and investors really should make sure they put as much as they can in their Isa each year," said Rob Fisher, of Fidelity Investment Managers.

"Over 42% of the UK population are still not taking up their Isa allowance. Isas are an all year round use-it-or-lose it tax perk and a perfect way to avoid giving hard-earned money straight back to the taxman."

Tax-free savings accounts were first introduced to UK savers 11 years ago as an incentive to encourage saving.