The New Isa, or Nisa, will see the annual allowance hiked from £11,880 to £15,000 – the biggest rise since ISAs were introduced by the government in 1999.
The change, which was introduced by chancellor George Osborne in his March Budget, will permit savers to switch money freely between cash accounts and stocks and shares accounts.
This scraps the old system where you could only move money from cash accounts to stocks and shares accounts.
However, research from Hargreaves Lansdown suggests investors will actually hold more money in stocks and shares compared to cash despite the change.
“Whilst this may seem counter-intuitive, given the new freedom to transfer in the other direction, there are a couple of good reasons for this,” Hargreaves Lansdown Danny Cox said.
“The very fact that they know they will be able to switch out of stocks and shares and back into cash if required, is giving investors more confidence to go into stocks and shares in the first place.”
The allowance increase is the biggest hike ever, with allowances pegged at £7,000 between 1999 and 2008 before moving up slowly.