ISA Allowance Increased By £3k

Chancellor Alistair Darling's latest Budget has given savers a boost, with a £3,000 increase in the annual allowance under tax-free ISAs. The new total annual allowance will be £10,200, rising from the current £7,200 limit, and will apply to those aged 50 and over from this year. The increased allowance will be extended to everyone in 2010.

Mr Darling said that the new overall allowance included an increase in the cash limit from £3,600 to £5,100. Since their launch 10 years ago, almost £290 billion has been saved in tax-free ISAs, the Chancellor said, with 18 million people having taken them out.

All money held in an ISA grows free of tax, with savers currently able to put in up to £7,200 a year in equities or a combination of equities and cash. The latest Budget announcement marks the second ISA allowance increase since their introduction in the 1999 Budget to replace former tax-efficient savings vehicles PEPs and TESSAs.

The total allowance was increased last year from £7,000 to £7,200.