FROM 1999 TO 2020: A HISTORY OF THE UK’S ISA ALLOWANCE

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An Individual Savings Account (ISA) can be a viable option to earn tax-free returns on your investments. 

Between 1999 and 2020, the ISA allowance, which limits the amount investors can contribute across all individual savings account types over the course of a single tax year, has increased by £13,000*. 

Let’s discuss how we got there over the last two decades, and explore which ISA types are still on the market today. 

THE UK ISA ALLOWANCE HISTORY

ISAs launched in 1999 when Gordon Brown became Chancellor of the Exchequer and the initial allowance was set at £7,000* per tax year. 

The first change to the existing limit came in in the 2008/09 tax year, when the allowance was increased by £600* a year. Although this may seem minor in hindsight, it did help to set the stage for a period of consistent increases during the decade that followed.

NEW ISA PRODUCTS HIT THE MARKET

This particular decade would also involve the addition of new ISA products, to compliment the Cash and Stocks & Shares options that were part of the launch. Since 1999, four new ISA types have been added to the list, including Junior (2011), Help to Buy (2015), Innovative Finance (2016) and Lifetime ISAs (2017). 

STEADY ISA ALLOWANCE INCREASES

As the number of products started increasing, so did the ISA allowance. At the end of 2009, the first significant increase was made, when the overall allowance was raised to £10,200* for people aged over fifty. In the 2010/11 tax year, this limit was applied across all demographics. From this point on, the ISA limit also became more prominent in the annual budget speech. 

By the 2013/14 tax year, the limit increased to £11,520*. From July 2014, the overall amount investors could contribute across all ISA types hit £15,000*. This came with greater flexibility on the rules related to the transfer of ISAs. In March of 2017, it was announced that the limit would increase to £20,000*, which is where it has stayed ever since. 

THE ANNUAL ISA ALLOWANCE TODAY

As of 2020, the annual ISA allowance is £20,000*. Investors are able to spread their contributions across multiple types, as long as they stay within the overall allowance. 

The tax year runs from April 6th of the current year to April 5th of the following year, and it is important to remember that unused limit amounts do not carry over into the new year. 

INNOVATIVE FINANCE ISAS

IF-ISAs present an alternative investment opportunity to Stocks and Shares, in the form of Peer to Peer loans. Peer to Peer investing is often driven by innovative Fintech companies, providing an online platform to create and manage the account. As with all investing, capital is at risk and there is no FSCS protection. This Beginner’s Guide to IF-ISAs is a useful resource to learn more about how this product works. 

Over the past eleven years, the ISA limit has increased from £7,000* to £20,000*, giving investors the perfect opportunity to make their investment returns do more for them over a given tax year. 

In times of economic uncertainty, every bit helps. ISAs allow investors to earn tax-free returns on investments, effectively creating an opportunity for passive income and long-term earnings across their overall portfolio. HMRC rules apply

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