Individual Savings Accounts (ISAs) turned 25 years old on 6 April, and to mark the occasion, this article highlights four key changes the government has introduced for the 2024/25 tax year.
ISAs are a popular way to save and invest tax-efficiently. Indeed, the latest government figures show that around 11.8 million adult ISA accounts were subscribed to in 2021 – 22.
While some hoped-for changes were missing from the government’s plans – most notably, an increase in the annual ISA allowance, which remains at ÂŁ20,000 for the 2024/25 tax year – the following new rules took effect from 6 April 2024.
1. You can open and pay into multiple ISAs of the same type
There are four main types of adult ISA:
- Cash ISA
- Stocks and Shares ISA
- Lifetime ISA
- Innovative Finance ISA.
Before 6 April 2024, you could only pay into one of each type of ISA in a single tax year.
Happily, this rule has been removed and you can now save into multiple ISAs of the same type. So, for example, you could hold a Cash ISA with two separate providers.
This means that you could benefit from greater flexibility in moving your savings and investments between different providers, allowing you to take advantage of the most competitive rates.
For example, you might open an ISA and pay a lump sum into it, only to find an alternative provider offering a higher interest rate a few months later. Under the previous rules, you would not have been able to open a second ISA, but since the new rules came into effect on 6 April, now you can.
The new change could also prevent you from accidentally paying into more than one of the same type of ISA in a single tax year – which may be surprisingly easy to do if you transfer funds automatically.
2. You can make partial transfers between providers
Previously, the ISA rules on transferring funds between providers were based on an all-or-nothing approach. You could transfer your entire ISA to another provider in a single tax year, or none at all.
Under the new rules, you can transfer any amount of your ISA balance to a new provider, regardless of when you made the subscription.
So, you could enjoy greater flexibility in how you manage your ISA savings and investments.
This may be especially beneficial if you’ve been investing in ISAs for many years and have built up large sums in your accounts, as partial transfers could allow you to further diversify your portfolio and balance investment risk.
3. There’s no need to reapply for your existing ISA accounts each year
Before the 6 April changes came into effect, if your ISA account was dormant for a full tax year, you would effectively have had to reapply for your account if you wanted to resume making contributions.
The government has now scrapped this rule, which often caused confusion.
As a result, you can avoid the unnecessary red tape and admin of reapplying if you take a break from investing in your ISAs.
4. The minimum age for Cash ISAs has been raised
On 6 April 2024, the minimum age for opening a Cash ISA was raised from 16 to 18 years old.
This brings the age criteria for Cash ISAs in line with other types of ISAs.
So, if you want to open a Cash ISA for your child or grandchild, you’ll need to opt for a Junior ISA (JISA) if they’re under 18.
This rule change closes the JISA “loophole”. Previously, your child or grandchild could pay up to £9,000 a year (2023/24) into a JISA and up to £20,000 into an adult Cash ISA – so they could save up to £29,000 tax-efficiently each tax year. This is no longer possible.
The government is also considering the idea of launching a new “UK ISA”
In addition to the changes that took effect on 6 April 2024, the chancellor Jeremy Hunt announced in his Spring Budget speech that the government will introduce a “British ISA”.
This new type of ISA would give savers an additional ÂŁ5,000 ISA allowance for investing in UK equities.
However, the government is currently consulting on the British ISA, and it is not yet clear when this will launch, nor exactly how it would work.
Get in touch
If you’d like to know more about how April’s ISA changes could affect your savings and investments, please email us at hello@intelligentpensions.com or call 0800 077 8807.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
