The tax-free cash Isa allowance is set to be raised to 5,100, the Chancellor announced today.

For the over 50s, the increase comes into force on 6 October 2009, though everyone else will have to wait until the next tax year, in April 2010.

As a cash Isa is a simply a tax-free savings account, it means you'll be able to save up to 5,100 a year without handing any of your interest over to the Taxman, up from the current 3,600 limit per tax year.

The overall Isa limit will increase to 10,200 (up from 7,200), which includes what you can also invest - with tax benefits - in a stocks and shares Isa. You can invest up to 10,200 per tax-year in a stocks and shares Isa, though for every 1 you put in a cash Isa, you lose 1 in your stocks and shares allowance.

Savers who are 50 or over before 6 April 2010 get the extra allowance for the current tax year, from 6 October. If you turn 50 between 6 October 2009 and 5 April 2010, then you'll have access to the additional allowance from your birthday. Everyone else will miss out on the 3,000 boost to the allowance for 2009/10, and have to wait until next April.

Martin Lewis, creator of, says: "After the battering savers have taken this year from plummeting interest rates, this is really good news. However, Isas limits are already complicated enough, and a big cause of confusion.

So to have an additional limit half way through the year for certain people is about the last thing we needed. With savers suffering right now, a simple announcement to put the limits up with immediate effect for everyone would have done a lot more good."

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