Investors could be £28k better off with new increased ISA limit

With the recent confirmation of the new ISA allowance for the next tax year, Fidelity Investment Managers is encouraging investors to utilise this additional £480 each year to significantly increase their long term savings pot.

For example if a 35 year old basic rate tax payer placed the new allowance of £10,680 into an ISA assuming an annual return of  4.5% per annum fund each tax year, before charges, they could now amass £679,077 by the time they reached 65.  This is an additional £28,803 more than if the ISA allowance remained at its existing level of £10,200 per year.

Just how much extra the investor will get back by sheltering savings in an ISA will depend upon choice of investment and their tax rate.  However, what doesn't change is that ISAs are a powerful use-it-or-lose-it tax perk with no further tax to pay on future returns but no way back if you let the tax year pass without taking up your allowance.

Rob Fisher, Head of UK Personal Investments at Fidelity Investment Managers said; "We welcome the news that the average Isa allowance is set to rise by £480 next year.  With the allowance rising to £10,680 in the next tax year, a couple will now be able to save £21,360 per year in their ISAs and enjoy tax free returns.

"We have recently carried out some new research which shows that more than 52% of the UK population are saving for financial security but over 42% of the UK population are still not taking up their ISA allowance.    With rising taxes, savers and investors really should make sure they put as much as they can in their ISA each year and not miss out on the tax relief that is rightfully theirs.  ISAs are an all year round tax perk and a perfect way to avoid giving hard earned money straight back to the tax man."

More details on ISAs can be found on Fidelity's dedicated ISA and tax page on the website at fidelity.co.uk/isa.