Last week's Budget presented us with plenty of surprises, and for many people the key announcement was that there'd be a new ISA (or NISA) being launched in July.
It's left a lot savers rejoicing, and with good reason – it's easily the most positive piece of news the market has had in some time, particularly in the wake of plummeting savings rates, but we thought we'd break it down a bit. So, just what can you gain from the NISA?
Let's look at a few calculations. Currently, the average rate across the range of easy access cash ISAs is 1.45%. If you were to invest your full 2013/14 ISA allowance of £5,670 you'd be left with £5,752 at the end of the year – a profit of £82, entirely tax-free. As of April 6 that allowance will increase to £5,940, so using the same average rate of 1.45% you'd make a profit of £86 over the year.
But, what happens when the NISA launches? In July the annual NISA allowance will become an impressive £15,000, so if average cash ISA rates were still 1.45% you'd be left with £15,217.5 – a tax-free return of £217.50 over the year. If you opted for a longer-term ISA (currently average interest rates are 2.09%) you'd be left with even more, and that's before considering the potential returns that could be achieved if you invested the full amount in stocks and shares as opposed to cash.
As you can see, if you're able to invest the full NISA allowance in July you could easily be a lot better off, and if you're willing to lock your money away you could achieve returns of 3.00% or more – currently, the top cash ISA rate comes from Skipton, with its 5 Year Fixed Rate ISA paying this very amount.
It's about time the savings market had some good news, and the option of being able to save up to £15,000 entirely tax-free will certainly benefit a lot of people. This is even before providers have started to release details of their upcoming NISA accounts – so far Halifax and Skipton are the only providers to be NISA-ready and luckily both are saying they'll let savers top-up to the full NISA allowance in July, even if they put the current 2014/15 allowance in a fixed rate ISA in April.
Of course, before the new allowance comes into being, you still want to make the most of your savings. If you're yet to use your ISA allowance for this year you've only got a week left, so why not check out the best rates?
A word of caution, however – even though Halifax and Skipton have announced ISA changes in light of the new rules, other providers have yet to follow suit. That means, if you want to take advantage of the full NISA allowance you might not want to deposit the full £5,940 and fix your rate as soon as April hits, as a lot of fixed rate ISAs won't allow further additions later down the line. This could well change by next week however as more providers announce their plans, but just make sure to read the small print first. Do so and you could easily make the most of your money, both now and when July is here!
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.
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