Personal savings

• Individual savings accounts
• Pensions: Limiting tax relief for high income individuals

Individual savings accounts

The ISA limit is currently £7,200, of which £3,600 can be saved in a cash ISA with one provider. The limit will be raised to £10,200, up to £5,100 of which can be saved in cash. The new limits will apply to people aged 50 or over in 2009/10, and for all ISA investors from 2010/11 onwards. Raising the ISA limits for people aged 50 or over for 2009/10 will have effect on or after 6 October 2009, and for everybody else on or after 6 April 2010.

Pensions: Limiting tax relief for high income individuals

The Government has announced its intention to restrict, to the basic rate of income tax, tax relief on pension contributions with effect from 6 April 2011 for people with taxable income of £150,000 or more.

It will not be possible to increase pension contributions between now and 6 April 2011 to take advantage of the restriction in the tax relief, if the following conditions are met, for an individual with an income of £150,000 or more who, on or after 22 April 2009:

• Changes their normal pattern of regular pension contributions, or
• Changes the normal way in which their pension benefits are accrued, and
• Their total pension contributions/benefits accrued exceed £20,000 a year.

These anti-forestalling provisions will apply to both final salary and money purchase pension schemes on or after 22 April 2009. Individuals with income of less than £150,000 for the tax year, and both the preceding two tax years will not be affected. Neither will individuals with income of £150,000 or more between now and 6 April 2011, providing their existing pattern of making pension contributions does not change, and they do not make any additional contributions.

In cases where regular pension savings exceed £20,000, the new tax charge only applies to any pension savings made on or after 22 April 2009 in excess of regular savings. If the regular savings are less than £20,000, the tax charge only applies to any excess over £20,000. The tax charge restricts tax relief on the additional pension savings to the basic rate of income tax, and applies to contributions made by the employer or tax payer.