MONEY COMMENT
Fill Up Your ISA Before It's Too Late

By Jane Mack (TMFJane)
December 12, 2003

There seems to be a bit of confusion at the moment about when, or even whether, the current ISA contribution levels of £7,000 a year will change.

When the Chancellor of the Exchequer launched these tax-free savings and investment accounts in 1999, we were told that we would be allowed to put up to £5,000 a year in either the Maxi version or a combination of the three Mini versions. The relevant document states:

It will have an annual subscription limit of £5,000, of which no more than £1,000 can go into cash and £1,000 into life insurance; however, in the first year of the scheme only (1999-2000), the annual limit will be £7,000, of which no more than £3,000 can go into cash and £1,000 into life insurance.

In other words, the extra £2,000 was merely a temporary bonus. Then, the following year in the Pre-Budget Report 2000, the Chancellor said he was so pleased with our take-up of the scheme he'd decided that:

To build on the success of ISAs, the Government will retain the £7,000 contribution limit for a further five years until April 2006.

Since the Chancellor's latest Pre-Budget speech (on Wednesday) there has been an outbreak of publications on both the Treasury and Inland Revenue websites detailing all the changes that the Chancellor is proposing.

Of those that relate to ISAs, the main change is that we're going to be allowed to invest in some new products, which include an insurance element – thus rendering the current ISA insurance element redundant. It adds the phrase that:

Maximum investment limits for the stocks and shares maxi ISA and cash component of the ISA will remain unchanged.

However, the Inland Revenue website states that the new products will:

... allow those choosing a 'maxi ISA' to subscribe up to £7,000, in 2005/06 and up to £5,000 thereafter ...

You can see why there's some confusion. However, the government hasn't changed its stance at all – it just hasn't reminded us in the first of these two announcements that from April 2006 we'll only be allowed to invest £5,000 a year in ISAs. If you're a fan of mini cash ISAs, the news gets worse still. For 2006/07 the subscription limit for these popular products falls from £3,000 to £1,000.

Considering how desperate the Government is for us to save, you'd think they'd raise the contribution limits rather than lower them. But that's neither here nor there. The fact is you've only got this tax year and two further years to stuff your ISAs with as much as £7,000. So get stuffing!

Find out more about ISAs.