ISA limit to rise by £480

The amount of tax-free cash Britons can stash in individual savings accounts is due to rise by almost £500, taking the annual limit to £10,680.

From April 5, account holders will be able to invest an extra £480 for the 2011-12 tax year, representing an increase of 4.7% on the existing limit of £10,200.

The move follows the government’s announcement in the Emergency Budget that it would annually increase the ISA allowance by the September retail prices index.

Under the proposal, ISA account holders can invest up to half of the new limit - £5,340 - in cash, up from the current cash limit of £5,100.

"The new ISA limit is a positive move by the Coalition Government to encourage saving," said independent financial adviser Tony Harris, of ContractorMoney.

"It is a particularly welcome relief after months of speculation that the limit would be cut in this week's spending review."

Savers can deposit up to half their allowance in a cash ISA; 100% in an equity or stocks ISA, which out perform cash accounts in the long-term, or a mixture of both.

Addressing contractors, Mr Harris reflected:"You may wish to invest more into a stocks and shares ISA as these tend to offer the highest returns in the long term.

"This is especially true at the moment as interest rates are at 0.5% so returns on cash ISA's will be relatively low in the short term.

"However, it is important to bear in mind that the value of an equity based ISA can fluctuate so to minimise risk these should be viewed as a long term investment option."

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