“We are backing a Britain that saves”, chancellor George Osborne said while unveiling an overhaul of Isas 15 years after the product was first introduced.
During his Budget speech, Mr Osborne said the annual Isa allowance will be increased from £11,520 to £15,000 1 July.
The increased limit will apply to a single Isa, which combines the current Cash and Stocks & Shares wrappers.
Mr Osborne also stated Junior Isa limits will be increased to £4,000.
He said: “Twenty four million people in this country have an Isa. And yet millions of them would like to save more than the annual limits of around five and a half thousand pounds on cash ISAs, and eleven and a half thousand pounds on stocks & shares Isas.
“Three quarters of those who hit the cash Isa limit are basic rate taxpayers. So we will make Isas simpler by merging the cash and stocks Isas to create a single New Isa.
“We will make them more flexible by allowing savers to transfer all of the Isas they already have from stocks & shares into cash, or the other way around.”
For the 21m people invested in premium bonds, Mr Osborne said he was lifting the cap for the first time in a decade from £30,000 to £40,000 this June, and to £50,000 next year. The number of million pound winners will be doubled, he added.
On personal tax allowances, Mr Osborne as expected said next year there will be no income tax at all on the first £10,500 of your salary. This translates to £800 less in tax every year for the typical taxpayer, he added.
The higher rate threshold will increase for the first time this parliament, from £41,450 to £41,865 next month, and then by a further 1 per cent to £42,285 next year.
People earning up to £100,000 will be paying less income tax because of this Budget, according to Mr Osborne.
The rate of the transferable tax allowance for married couples will also be linked to the personal allowance, so it will also increase to £10,500.
