Currently individuals can invest up to £15,000 in a tax free ISA.
However, if any part of the amount invested in a tax year is withdrawn, that part of the limit is wasted and cannot be subsequently reinvested later in the tax year.
Individuals with non-savings income that do not exceed the personal allowance, currently pay income tax at 10% on the first £2,790 of savings income. As previously announced, from 5 April 2015, the starting rate for savings income will increase to £5,000 and the rate of tax will be reduced to 0%.
This means that an individual will not have to pay tax on interest income if their total taxable income is less than £15,600 (£5,000 plus personal allowance of £10,600).
Subject to further consultation, changes will be made in Autumn 2015 to allow individuals to withdraw money from their cash ISA and re-deposit it in the same year without the second deposit counting toward their annual ISA subscription limit.
In addition, from 6 April 2016, a new savings allowance will be introduced. This will remove tax on up to £1,000 of savings income for basic rate taxpayers and up to £500 for higher rate tax payers. No allowance will be provided to additional rate taxpayers.
These announcements will be welcomed by savers.