What is NISA and how it is different from ISA?

/ Posted By - Bradleys Accountants / Categories - Accounting for Individuals

According to research, almost 25% of people in the UK don’t save for their retirement or pensions. To encourage savings, the government is advising people to invest in ISAs for their and their family’s future. The Chancellor, George Osborne, in his 2014 Autumn Statement today announced new measures to boost savings in the country via NISAs (new individual savings accounts). According to the new ISAs, everyone over 16 in the UK will now be able to save up to £15,240 in a cash ISA a year. In this article, we take a detailed look at NISA and how it can benefit the UK taxpayer.

Firstly, what is an ISA?

ISA is a short form for Individual Savings Account which is a tax efficient way to save or invest your money. Usually, you pay income tax on the interest that you earn on your savings accounts but an ISA allows you tax free interest income. So, all the interest you earn, you keep it.

There are different types of ISAs, Cash ISAs, Stocks and Shares ISAs etc. You get new ISA allowances each tax year which starts from 6 April.

So what is NISA?

There has been a monumental change to the Individual Savings Account (ISA) since their introduction 15 years ago. In the Budget of 2014, the chancellor had announced a simpler product, the New ISA (known as NISA) for savers to make them more accessible and attractive.

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    How NISA is different from ISA?

    Savers want a better return on investment and NISA has been designed just to do that but with a greater flexibility. The main difference is that the ISA allowed you to invest an amount of up to £11,800 but NISA increases this to £15,240 per year (from next April) and that can be held as either cash or stock and shares or any combination of the two. The earlier ISA limited the amount which could be held in cash versus equity.

    NISAs will make it possible for you to switch to equity or cash and you can transfer previous years ISA savings freely between cash and stocks and shares.

    The only part which has not changed is that you can only contribute to one cash ISA and one stock and shares ISA for each tax year. Alongside these changes, Child Trust Fund and Junior ISA allowance limits have risen from £3840 to £4080 from this April.

    The introduction of New ISA rules allows you greater flexibility to choose where you want to invest creating greater chance for you get a better return on your investments.

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