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Budget 2009: Savings – Isa limits increased

Isa limit up to £10,200, £5,100 in cash Isa

Chancellor of the Exchequer Alistair Darling announces increase in Isa allowances

The Budget

Isa limit increased to £10,200

The annual allowance for Isas will increase from £7,200 to £10,200, the Chancellor announced. Of this new maximum, £5,100 can be deposited in a cash Isa.

The new limits will be introduced in the current tax year for those aged 50 and over, whilst individuals under 50 will have to wait until next year before they can enjoy the increased limits.

To find the best cash Isa for you, check out our Which? Best Rate cash Isas.

Child trust fund payments for disabled children

Darling also announced that £100 a year will be added to the child trust funds (CTFs) of disabled children.

Severely disabled children will see £200 a year paid into their CTF by the government.

Bad news on dividends for high earners

Basic rate taxpayers currently pay tax on dividends at 10%, whilst higher rate taxpayers pay tax on dividends at 32.5%. The 10% tax cannot be reclaimed, even if the investment is held within a stocks and shares Isa or the holder of the Isa is a non-taxpayer.

When the new 50p income tax band is introduced in 2010, the tax rate payable on dividends by individuals who fall into the new higher band will increase to 42.5%.

Personal budget calculator

To see what effect the Budget will have on your own finances, try out our Budget 2009 calculator.

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