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ISA Bulletin Number 14 - 25 June 2009

The ISA Bulletin keeps ISA managers informed of any new developments relating to the ISA scheme. Please ensure the appropriate people in your organisation read it.

We suggest that you keep Bulletins at the front of your copy of the Guidance Notes for ISA Managers.

What this Bulletin contains

This Bulletin contains an article on

  • Budget 2009 - increase in the ISA limits

Enquiries on this bulletin should be addressed to

David Taylor
HM Revenue & Customs (SSO Liverpool)
Room 330
St John's House
Merton Road
Liverpool
L75 1BB

Telephone: 0151 472 6156

Email: David Taylor

Budget 2009 - increase in ISA limits

ISA Bulletins 11 and 12 informed you that the ISA limit is to be raised on 6 October 2009.

The Regulations giving effect to this change have now been laid as SI 2009/No.1550. You can download a copy from the Office of Public Sector Information (OPSI) website at

Statutory Instrument 2009 No. 1550 Income Tax The Individual Savings Account (Amendment) Regulations 2009 (Opens new window)

An explanatory memorandum is also available at

Explanatory Memorandum to The Individual Savings Account (Amendment) Regulations 2009 2009 No. 1550 (Opens new window)

Implementing the new limits

The Financial Services Authority (FSA) have confirmed that it is a commercial decision for ISA providers on whether they decide to allow eligible customers (those born on or before 5 April 1960) to subscribe up to the higher ISA limits from 6 October 2009.

Communicating the new limits to investors

The FSA believe that from a Treating Customers Fairly perspective, it is very important that ISA providers communicate clearly and effectively with their customers so that they are aware that only those who are eligible can make subscriptions up to the higher ISA limits from 6 October 2009. This does not mean that all ISA customers have to be notified directly (by direct mailing) but the message should be made clear in any communication customers may use to inform their decision to make payments into an ISA before or at the point of sale (the provider's website, product brochures etc). Branch staff should also be aware of the new limits and should make customers aware of them when discussing payments into an ISA, both face-to face and over the phone.

If providers wish, they can extend the window in which they issue half-yearly reminders (Guidance 10.41) to September 2009 so that they can use this opportunity to advise their clients of the new ISA limits.

Recommended wording

HM Treasury (HMT) and HM Revenue & Customs (HMRC) officials have worked with BBA, BSA, TISA and IMA to develop and agree some wording that ISA providers may wish to use in their product literature to help promote a clear and consistent message about the changes. It is as follows.

From 6 October 2009, the ISA subscription limit will increase to £10,200 for anyone eligible to invest in an ISA who was born on or before 5 April 1960 (that is, who will be aged 50 or over during the current tax year). Up to £5,100 of the new ISA allowance can be saved in a cash ISA with one provider. The remainder of the £10,200 can be invested in a stocks and shares ISA with either the same or another provider. Alternatively, the full £10,200 can be invested in a stocks and shares ISA with one provider.

These higher limits will apply to all eligible ISA investors with effect from 6 April 2010.

Example 1

An individual is aged 65. He has not opened an ISA in tax year 2009-10. From 6 October 2009 his ISA allowance will be £10,200. Up to £5,100 of his allowance can be saved in a cash ISA with one provider. The remainder of the £10,200 can be invested in a stocks and shares ISA with either the same or another provider. Alternatively, the full £10,200 can be invested in a stocks and shares ISA with one provider.

Example 2

An individual is aged 70. She has opened a cash ISA in 2009-10 in which she has subscribed £3,600. From 6 October 2009 she will have an ISA allowance of £10,200. She could save up to another £6,600 in ISAs. This could be up to £1,500 in the same cash ISA, or up to £6600 in a stocks and shares ISA with either the same or another provider, or a combination of both.

Example 3

An individual's fiftieth birthday falls on 15 March 2010. He has opened up a stocks and shares ISA in 2009-10 in which he has subscribed £7,200. From 6 October 2009 he could save up to another £3,000 in ISAs. This could be up to £3,000 in the same stocks and shares ISA, or up to £3,000 in a cash ISA with either the same or another provider, or a combination of both.

Fixed-rate products

Providers who are currently offering fixed rate ISA products should update their product literature to advise customers born on or before 5 April 1960 that they may not be able to subscribe above £3,600/£7,200 from 6 October 2009 if they choose to open the product now. It is a commercial decision for each provider on whether they decide to allow further subscriptions from 6 October 2009.

Literature and forms

The FSA have advised that ISA providers will not be required to reprint their product literature or application forms. However, they should produce an addendum to their ISA Key Features Documents, Terms and Conditions and any other relevant marketing literature.

Application Forms already printed for 2009-10 containing the old wording and limits can be used after October 2009. We will expect ISA providers to use new application forms for the 2010-2011 tax year.

The new declaration wording (see ISA Bulletin 12) can be used from now onwards (before October 2009 if the manager chooses).

Continuous Declarations already in place do not need to be replaced (providing an annual subscription is received).

Annual reports

The increase in subscription limits will not result in any changes to annual reporting procedures.

Direct Debit payments

Those investors who subscribe by monthly Direct Debit, and specifically those who subscribe more than a twelfth of the ISA limit each month, must be contacted before an increased amount is taken or the Direct Debit is re-started.

HMRC compliance

We will continue to operate our risk based investor compliance programme. Under that programme those who over-subscribe for one year, but not significantly in excess of the annual subscription limits, receive a letter drawing their attention to the ISA rules and advising them no action will be taken unless they over-subscribe in a later tax year. ISA over-subscriptions are only voided where the investor has:

  • subscribed to a disallowed combination of ISAs for more than one year (serial offenders)
  • or subscribed significantly in excess of the annual subscription limits

We do not plan to deploy any extra resources in this area as a result of the 2009-10 subscription limit changes.

As a matter of good practice, if a customer discloses to their provider that they have over-subscribed, we would expect the provider to direct the customer to HMRC, who, as now, would advise the customer on next steps to take.

If an investor who was born on or before 5 April 1960 subscribes up to the higher limits after 6 October 2009 but before their fiftieth birthday and then dies before their birthday, the ISA benefits will not be clawed back.

The HMRC Guidance Notes for ISA managers will be updated to reflect the changes to the ISA Regulations. The Guidance Notes are available at

ISAs Guidance Notes for ISA Managers (PDF 1.18MB)

Future articles

Part of the purpose of the ISA Bulletins is to clarify areas of the Guidance Notes for ISA Managers. If you feel that any aspect of the guidance is unclear you should contact David Taylor. His telephone number is 0151 472 6156.