ISA Subscription Limits Raised

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07/10/2009

The opportunity for some to increase their annual subscription with effect from 6 October 2009

The ISA subscription limit has been raised to £10,200, of which up to £5,100 can be invested in cash. These new limits will apply to people who are or will be aged 50 or over in tax year 2009/10, and to all qualifying investors, irrespective of age, from tax year 2010/11 onwards.

The commencement date of the new limit for the “over 50” group is 6 October 2009, and ISA providers will not need to obtain fresh applications from such investors before they make subscriptions based on the new higher limits. The options available to “over 50” investors between 6 October 2009 and 5 April 2010 are as follows:-

Those who have not made any ISA subscription for 2009/10 can put up to £5,100 into a cash ISA and the balance of up to a combined amount of £10,200 into a stocks and shares ISA. A cash and stocks and shares ISA can be taken with different providers (ie. one for each type of ISA).

Those who have already subscribed the pre 6 October 2009 maximum of £7,200 can subscribe a further £3,000, subject to holding a total maximum of £5,100 in cash.

For example, Bill subscribed £2,500 to a cash ISA and £4,700 to a stocks and shares ISA. For future investments, he has decided to reduce his exposure to risk so he invests £2,600 in his existing cash ISA (top- ups must be made with the same provider) and puts the remaining £400 in his stocks and shares ISA.

Conversely, Jean subscribed £3,600 to a cash ISA with provider X on 6 April 2009 because, in view of the then state of the investment markets, she had decided it was not yet the time to invest in equities. With the recent improvements in the markets she is now less risk averse and decides to invest £6,600, ie. up to the increased maximum of £10,200, with provider Y in a stocks and shares ISA.

Henry has always used his ISA subscription to make the maximum investment in stocks and shares. He invested £7,200 (the maximum) with provider W in May 2009. He now wishes to take advantage of the increased subscription limit but is unhappy with provider W’s investment performance. In light of this he wishes to invest the £3,000 top-up with provider V who offers a very attractive new commodities fund. Unfortunately for Henry, as he can only have one provider at a time for his stocks and shares ISA, this means that he must either invest a further £3,000 with provider W, or transfer the whole of his 2009/10 subscription to provider V so that he can then pay his £3,000 top-up into the new commodities fund.

This document is strictly for general consideration only. Consequently Capital Ideas cannot accept responsibility for any loss occasioned as a result of any action taken or refrained from as a result of the information contained in it. Each case must be considered on its own facts after full discussion with the client's professional advisers.

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