By ACCA’s Budget team
The Government proposes a new Junior Individual Savings Account (ISA) product for UK children and alters the way the annual ISA subscription limit is calculated.
Introduction of Junior ISAs
The Finance Bill 2011 will include provisions to introduce Junior ISAs, which will be available to all UK resident children under 18 years old who do not have a Child Trust Fund.
Junior ISAs will be very similar to existing ISAs in that they will be available as cash or stocks and shares products, and will also be tax relieved. They are expected to be available from this Autumn.
The draft legislation is still subject to further development and will set out proposed account features and processes. This measure is designed to encourage families to save.
CPI Indexation: Annual ISA Subscription Limit
For 2010-11, the annual ISA subscription limit is £10,200, of which half can be subscribed to a cash ISA. These limits are set out in the ISA regulations (SI 1998/1870).
For 2012-13 and subsequent years, the annual limit will be increased by reference to the consumer prices index (CPI). This will take place annually using the CPI for September prior to the tax year, and the new limit will be rounded to £120 to allow for 12 equal monthly payments into the ISA.
The cash ISA limit will still be half the total limit. If the CPI is negative the subscription limit will not change.