ISA allowances extended

The maximum allowed contribution to individual savings accounts (ISAs) will not be cut, chancellor Gordon Brown announced today.

17:20 02 December 2004

The maximum allowed contribution to individual savings accounts (ISAs) will not be cut, chancellor Gordon Brown announced today.

Currently consumers can invest 3,000 a year in a cash savings account, 3,000 a year in equity, and 1,000 in insurance.

The ISA was created as a tax-efficient way to encourage those on low incomes to save for their future. Money can be withdrawn from the product without a notice period or penalty charges, and interest earned is tax free.

However, the government was planning to reduce the amount of money that could be saved in cash each year from 3,000 to 1,000 after April 2006.

But today the chancellor announced that he will consult on extending the current limits to last until 2009.

"To help savers it is right to extend the tax free advantages for the first 7,000 of savings - 3,000 for the cash component - in individual savings accounts each year. So I will consult on extending the ISA limit for another five years to 2009," said Mr Brown.