The tax-free annual allowance for ISA contributions in 2014 is expected to rise to around £11,760 from April next year, up from its current limit of £11,520 per annum.
Half of this amount can be deposited into a cash ISA - £5,880, while Junior ISA contributions will increase to £3,840 from £3,720.
The ISA allowance is calculated based on the rate of inflation from the previous year in September. This week it was revealed that September's inflation rate was higher than anticipated by the markets at 2.7%, compared with the expected level of 2.4 or 2.5%.
The formula for working out the increase in the ISA allowance involves taking the September Consumer Prices Index figure and applying this to the previous year’s allowance. By then rounding this up to the figure nearest divisible by £120, this makes it easier for savers to make a rounded monthly contribution.
ISA's allow individuals to deposit a certain amount each tax year to avoid paying tax on the amount earned through interest. This can be classed as a tax free savings or investment accounts as offered by a financial institution, which allows money to be split equally within the annual limit between savings accounts and investments such as shares and funds.
There are currently 15 million ISA accounts in the UK, but these are mostly cash ISA's with an average of £3,900 deposited in each.
Due to growing concerns of the number of ISA millionaires, there is rumour that the Treasury is considering placing a cap of £100,000on the total amount that can be held in an ISA to curb benefits for savers viewed as wealthy.
Due to the compounding interest impact of the amount in the ISA account over time, some savers have taken their savings to well over £1m.
Sam has a degree in Business Studies from Bristol University West of England, and is an Associate of the Institute of Credit Management. He is a County football player and has captained local teams at both Truro and St Ives.
Sam is a Product Manager at checkmyfile.