On 1 July 2014 ISAs changed. The New ISA, or “NISA” (New Individual Savings Account) changes allow ISAs to be used as a home for even more money by increasing the yearly contribution limit, and improve flexibility by allowing money to be transferred from stocks and shares ISAs into cash ISAs.
Different NISAs have varying degrees of qualification. You must be:
- Aged 16 or over to open a cash NISA
- Aged 18 or over to open a stocks and shares NISA
- There are separate NISAs for children under the age of 16 – these are called junior NISAs
The allowance is the amount the government permits you to invest in your NISA accounts during each tax year. At the start of each new tax year (6 April) you’ll receive a new allowance. If you don’t use it, you lose it – the allowance can’t be rolled over to the next tax year. By using your NISA allowance each year it’s possible to accumulate a significant amount of tax-efficient savings.
In the 2014-15 tax year, individuals can invest up to £15,000 a year in cash NISA accounts, stocks and shares NISAs, or any mixture of the two – you can save the entire £15,000 in cash if you so wish. In the 2015-16 tax year this limit will increase to £15,240.
Remember that you’re only able to open a maximum of one cash NISA and one stocks and shares NISA each year. Once open you can transfer money between these different types of NISAs freely, subject to your provider’s terms.
This differs to the old Individual Savings Account (Isa) rule where you could transfer money from cash ISAs to stocks and shares ISAs, but not vice versa.
You can easily switch your NISA provider without losing your tax-free allowance, but it’s vital that you transfer the NISA rather than withdrawing the money to open a new account.
Under the old Isa rules, cash ISAs could be transferred into stocks and shares ISAs, but not vice versa. NISAs allow transfers either way – from stocks and shares to cash and vice versa.
As with ISAs, it is also still possible to transfer each type of NISA to another product of the same type. You can, for example, transfer one cash NISA to another, something you may want to consider to obtain a better interest rate.
Within a tax year you’re only able to transfer the whole of your annual NISA to a new provider. Amounts from previous years may be transferred as a whole or in parts as you wish, but you should be aware that not all NISA providers will allow part transfers.