New savings limits to benefit millions

Savers are in line for £2,000 extra in tax relief on their investments after a surprise extension to the rules on individual savings accounts yesterday.

When ISAs were introduced last April the government imposed a £7,000 tax-free limit for the first year only, after which it would fall to £5,000. But yesterday the £7,000 limit was extended for a further year, giving a 40% tax rate payer a potential extra tax saving worth around £50-£100 a year, depending on how investments perform.

Millions of people will bene fit from the new limits. So far this year 6.7m ISA accounts have been opened, taking in £17bn in savings. A spokesman for leading investment company Jupiter said: "It shows the government is really embracing the savings culture."

The chancellor also announced he would be putting into place many of the recommendations outlined in the Cruickshank banking review published on Monday.

He said the government would be bringing in legislation to open up access to payment systems such as cash machine networks and to monitor charges. Banks would be expected to make their charging more transparent and base their charges on the economic cost of providing services.