British savers will be able to benefit from more tax-free savings, thanks to changes made in this year’s Budget.
Chancellor George Osborne announced that cash Isas and stocks and shares Isas would merge into a single ‘New Isa’, in which savers will be able to store a maximum of £15,000 per year.
This annual limit can be reached using any combination of cash or stocks and shares.
Go further: What is an Isa? – learn the basics about this tax-free savings product
Watch our response to Budget 2014 in the Which? Money Podcast video special
Further Isa changes announced
In his Budget document, Mr Osborne also outlined a number of new changes to investments that qualify for Isa status.
Mr Osborne committed to allowing peer-to-peer lending to be placed into an Isa.
Corporate bonds and gilts will no longer have a maturity restriction of any type – a move away from the current restriction of five years.
Go further: Peer-to-peer lending explained – get to grips with this alternative type of investment
George Osborne introduces ‘pensioners bonds’
Mr Osborne announced that a new ‘pensioners bond’ would be introduced through National Savings & Investments (NS&I) in January 2015.
The bond, which will be available to all over-65s, will offer market-leading rates of 2.8% on a one-year bond and 4% on a three-year bond.
Pensioners will be able to store a maximum of £10,000 in these new products.
Go further: Budget 2014: The highlights – Which? rounds up the key announcements
10p tax rate on savings abolished
Low-income savers were also boosted by an announcement that the 10p tax rate would be abolished. This means that qualifying savers will pay no tax on nest-eggs of £5,000 or less.
Premium bond cap increased
The investment threshold for premium bonds was also substantially increased from its current limit of £30,000. It will rise to £40,000 in June and then to £50,000 in 2015. What’s more, the Chancellor pledged to double to the amount of £1m jackpots on offer.
The Chancellor described his Budget as one that will benefit ‘makers, doers and savers’.
Concluding his speech, he said: ‘You have earned it, you have saved it and this government is on your side. Whether saving for your home or your retirement, we are backing a Britain that saves.’
Go further: Premium bonds explained – learn more about this unique savings method.
Which? welcomes Chancellor’s announcements
On the changes to savings, Which? executive director Richard Lloyd said: ‘The Budget brings a welcome shake-up for struggling savers who too often get a raw deal.
‘Hiking the Isa limit will encourage more consumers to save, although we also now need to see more competitive interest rates from banks that have slashed these repeatedly in recent years.’