The new tax year will start in a few days on 6th April and there are a number of changes that will be implemented on this day.
In the Pre-Budget Report, George Osborne, the Chancellor of the Exchequer announced an increased on the allowance for ISAs from £15,000 to £15,240.
The increase is usually calculated in line with the inflation rate which is given by the Consumer Price Index. Due to the relatively low rate of inflation, the limit has only been increased by £240 for the upcoming new tax year.
Further to this, the limit for a Junior Individual Savings Account will be increased to £4,080 from £4,000 – this alteration will come into effect on the same day. Moreover, young people born between the dates of 1st September 2002 and 2nd January 2011, will be able to transfer their cash that is in child trust funds with poor rates to a more attractive Junior ISA.
Additional alterations to take note of pertain to the passing on of ISAs in the event of the account holderís death. In the past, the ISA was terminated and the tax advantages were stopped. This meant that the Executor of the Will or the administrator was left to account for any additional capital gains tax or income.
However, under new rules which came into effect on 3rd December 2014, ISAs are inherited tax free and therefore the Executor or surviving administrator does not have to worry about any additional costs.
George Osborne spoke about these alterations in the Autumn Statement last year. He commented: ìAt the moment, when someone dies, the savings in their ISA lose their tax-free status and their spouse starts paying tax on that money. From today, I can announce than when someone dies, their husband or wife will be able to inherit their ISA and keep its tax-free status.î
Further to this, he spoke about additional changes that would take place on 6th April 2015. Under these additional new rules, the surviving administrator is allowed invest an equal amount into their own ISA as the original holder used to. For example, the surviving spouse will be able to have an additional allowance meaning they can transfer their spouseís original ISA into one with their own name.
Mr Osborne stated: ìFrom 6th April 2015, surviving spouses will be able to invest as much into their own ISA as their spouse used to have, on top of their usual allowance, and so will be better able to secure their financial future and enjoy the tax advantages they previously shared.î