Next week will mark the introduction of NISAs (New Individual Savings Accounts) in the UK – but many people are completely unaware of the coming launch, or of what NISAs even are. As a result, millions are at risk of missing out on the benefits they offer.
New research by moneysupermarket.com* has revealed that two-thirds of Brits – or equivalent to 32 million people – are oblivious to the introduction of a savings product that will allow them to save more tax-free. So what exactly is a NISA?
Individual Savings Accounts, or ISAs, are popular products because they have few restrictions attached to them (the main one being how much you are allowed to save in one each year) and they let you save up to a set sum of money tax-free. This means the money you put in there (up to a certain limit) is the money you will save – none is taken to pay the taxman.
The limit on ISAs changes each year and for the 12 months ending April 2014 savers were able to pay up to £5,760 tax-free into a cash ISA. Alternatively, they could save up to £11,520 tax-free into a cash, stocks & shares ISA.
In the March Budget, Chancellor George Osborne announced the launch of the New ISA – or NISA – which he hoped would make saving easier and encourage people to save more. The savings account will let people save nearly three times more than the current ISA limit in cash – up to £15,000 tax-free.
Savers have the choice of either saving up to their full allowance as cash; as stocks and shares; or as a combination of the two. They can also transfer funds between the cash account and stocks & shares, so there is none of the rigid divide there is for traditional ISAs.
How it affects you
If you don’t currently have an ISA, you can open a NISA from July 1st and save up to £15,000 a year as either cash or stocks & shares in it – without paying a penny in tax. If you already have an ISA, you should be able to save on top of what’s already in there up to the new £15,000 limit.
Now, if you’re wondering whether it’s worth it, keep in mind that putting away even £1 a week all adds up to a sum that could prove extremely useful in the future, whether you need it to pay for car repairs or you treat yourself to a holiday. Of course, you could open a different type of savings account, but if you’re a taxpayer then the interest you make on your savings will have tax deducted from it before it is paid to you.
This is not the case with a NISA. Whatever interest you make on your savings (up to £15,000) will not be subject to tax – it’s all yours.
We can help
If you have a thinkmoney account and open a NISA, you can speak to us about setting up a regular payment to go straight into your savings. Just as we ensure there is money budgeted from your income each month to cover your essential outgoings like bills, rent or mortgage, we can do the same for your savings.
We will make sure you are not left out of pocket each month and have the money budgeted for your outgoings and savings.And while there are fees for our account, we never charge late fees or penalties – so you don’t have to worry about any unexpected charges. Find out more about the thinkmoney budgeting account here.