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HMRC have published details of the changes being made to the Individual Savings Accounts (ISA) rules, which take effect from 6 April 2008.

From 6 April 2008 the annual ISA investment allowance will be raised to £7,200. Up to £3,600 of that allowance can be saved in cash with one provider. The remainder of the £7,200 can be invested in stocks and shares with either the same or a different provider. In addition ISA savers will be able to invest in two separate ISAs each tax year - a cash ISA and a stocks and shares ISA. For example, investors can chose to save £1,000 in a cash ISA with one provider and £6,200 in a stocks and shares ISA with a different provider.

Mini and maxi ISAs will no longer exist. Mini cash ISAs, TOISAs and the cash component of a maxi ISA will automatically become cash ISAs. Mini stocks and shares ISAs and the stocks and shares component of a maxi ISA will automatically become stocks and shares ISAs.

In addition, from 6 April 2008, all Personal Equity Plans (PEPs) will automatically become stocks and shares ISAs. ISA savers will be able to transfer money saved in their cash ISA to their stocks and shares ISA. Investors will be able to invest in this re-labelled PEP, as long as they haven’t subscribed to another stocks and shares ISA during the current tax year.

Investors who wish to continue investing in existing ISAs do not have to take any action as long as they:

• saved in that ISA in the previous tax year;
• signed a continuous application form for that ISA, and
• have not already saved in another ISA of the same type (cash or stocks and shares) during the current tax year.

However, if an ISA is transferred to a new provider and a continuous application form was not signed, or the investor did not save in their ISA in the previous tax year, then a new ISA application form will need to be completed.

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HMRC: ISA rules are changing from 6 April 2008