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on 25 Mar 2010 5:48 PM

In last year’s Budget on April 22nd 2009, the government announced that ISA limits would increase from £7,200 to £10,200 from October 6th 2009 for over-50s and from 6th April 2010 for everybody else, which was great news for savers who liked to make the most of earning tax-free interest on savings.

In the 2010 Budget, announced yesterday (24th March), the government reaffirmed these changes and also added an extra bonus for ISA savers – Chancellor Alistair Darling announced that from 2011, ISA limits will increase in line with inflation.

According to an article in the Telegraph, if inflationary rates average out at the targeted figure of 2% over the course of the next year, the 2011/2012 ISA limit could rise above £10,400.

Plus, the limit could reach £11,200 within the space of five years if the inflation target continues to be achieved.

This is good news for savers because the increase announced in the 2009 Budget was only the second in the 10-year history of the ISA - since the introduction of the ISA in 1999, the ISA limit had remained at £7,000, with a £3,500 cash limit, until 2008 when it was increased to £7,200.

The announcement of annual increases in line with inflation will be seen as a good step for those calling for the government to step up and jumpstart British savers by increasing the amount they can save tax-free.