by Marie Bywater

Created on: March 29, 2010   Last Updated: March 30, 2010

An ISA (Individual Savings Account) is one of the best ways to save your money in the UK. Two of the main reasons for this are that ISAs commonly offer the highest interest rates available to savers, and more importantly any money you save into your ISA is tax free.  There are two different types of ISA available to save into, one is a savings ISA, and the other is a stocks and shares ISA.

In the 2009-2010 period each individual was allowed to save £3600 into both types of ISA giving them a total of £7200 in tax free savings.  The changes made to the ISA savings limits for 2010-2011 were announced almost a year back and detailed an increase in the amount of money you could save. Those individuals aged 50 or over can save up to £5100 in their ISA savings account, and Isa stocks and shares, or £10200 in stocks and shares before the 2010 April deadline, while those under 50 will have to wait until the next tax year before benefiting from the increase in the ISA allowance.  From April 5th 2010 everyone holding an ISA account can either save £5100 into both their savings account and stocks and shares, or else put the full £10200 into their stocks and shares ISA.  The ISA changes mean you have to decide how to split your savings, will you save the £5100 into your ISA savings account or put the full ISA limit of £10200 into your stocks and shares ISA? Please do remember that your stocks and shares ISA could be worth less than what you put in depending on the market.

The new ISA changes will be well received as it allows individuals to save more money and therefore get more interest tax free. However many did think the ISA allowance would be much greater than £5100 due to the current economic climate. On a good note though there is a strong competition between different ISA providers with interest rates as high as 3.5% being offered by Santander. Santander have promised to offer 3% above the bank of England base rate meaning that savers are getting more tax free interest from their money here than other banks.

In summary in 2010-2011 the changes to the ISA savings limits mean you can now save £5100 into both your ISA savings account and stocks and shares ISA giving you a total tax free savings of £10200, compared to the £7200 offered in 2009-2010.

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