The changes, which will be introduced on 1 July after years of campaigning by financial advisers, means that transfers between stocks and shares Isas to cash Isas will be permitted, with the limit increased from £11,880.
During his Budget speech, the chancellor of the Exchequer spoke regularly of the importance of reinvigorating saving and made a pledge to help savers by “dramatically increasing the simplicity, flexibility and generosity of Isas”.
In addition, Mr Osborne raised the limits for Junior Isas from £3,840 to £4,000, in a sweeping set of changes. In 15 years, savers have accumulated £443bn in Isas.
The chancellor said: “In this Budget, we make sure hardworking people keep more of what they earn – and more of what they save. I want to help savers by dramatically increasing the simplicity, flexibility and generosity of Isas.”
He added that the 24 million people in the UK with an Isa wanted to save more, with three quarters of those who hit the cash Isa limit being basic-rate taxpayers.
The decision to raise the limit and flexibility of Isas, the most successful investment vehicle since the war, was well received throughout the industry.
Carol Knight, operations director for the Tax-Incentivised Savings Association, said she was pleased with the overhaul of Isas 15 years after the product was first introduced. She said: “The ability to transfer from a stocks and shares Isa to a cash Isa is particularly welcome and is something that we have long argued for.”
Elissa Bayer, senior investment director at Investec Wealth & Investment, said: “It is encouraging savers can benefit from a new breed of tax-free Isas with an allowance of £15,000 and the end to the absurd rule that only allows savers to transfer cash Isas into stocks and shares and not the other way round. This will boost the savings industry and benefit basic rate taxpayers.”