With the new financial year upon us, your ISA allowance has reset once more, but this year there are changes afoot.
Updates to the ISA rules, announced by chancellor Jeremy Hunt in his 2023 Autumn Statement, come into effect in the 2024/25 tax year. They aim to simplify ISA investments and transactions, and encourage more people to take advantage of these tax-efficient options.
There could also be further changes yet to come. In the 2024 Spring Budget, the chancellor announced his proposal for a new British ISA, though it will be under consultation until June.
Read on to find out what the new ISA rules are and what they could mean for you.
New ISA rules came into effect on 6 April
The ISA rule changes announced by the chancellor in last year’s Autumn Statement came into force on 6 April 2024.
Research reported by MoneyAge has revealed that 78% of Brits are unaware of this rule overhaul, meaning that many may not enjoy the benefits the changes were designed to offer.
So, how do the new rules differ from the old ones?
You can now open multiple ISAs of the same type
The previous ISA rules permitted you to spread your annual £20,000 allowance across:
- One Cash ISA
- One Stocks and Shares ISA
- One Innovative Finance ISA
- One Lifetime ISA.
The new ISA rules state that as of April 2024, you can invest in multiple ISAs of the same type every year and make partial transfers between ISA providers.
Previously, you could not make partial transfers of ISAs if you had opened them in the current tax year, though you could transfer them in full. Now you can partially transfer ISA funds you’ve opened in the current tax year.
The new rules should make it simpler to switch providers if you are unhappy with your current service, and mean you can also shop around for the best rates, giving you more control over the money you have invested in ISAs.
For example, if you have money held in a Cash ISA and you find a provider offering more competitive rates, you could be able to open an account with the new provider and move your money to ensure you maximise your tax-efficient interest returns.
In addition, you may decide to keep some of your Cash ISA savings in an easy access account, while opening a second Cash ISA offering a fixed interest rate for a specific term. Previously you would have been unable to open multiple Cash ISAs in the same tax year.
The new rules may also help to protect you if you accidentally pay into more than one of the same types of ISA in a single tax year, which is easily done if you pay into your ISAs by direct debit.
There is a wider range of investment options
The new rules also permit you to hold long-term asset funds and open-ended property funds with extended notice periods in Innovative Finance ISAs, offering you a wider range of tax-efficient investment options.
Changes to the Cash ISA minimum age
The minimum age for opening a Cash ISA will rise from 16 to 18.
18 is already the minimum age for all other types of adult ISA, though 16 and 17-year-olds can manage a Junior ISA in their name.
The ISA allowances will remain the same
The Junior ISA cap will remain at £9,000 a year in 2024/25 and you can use it in addition to your own allowance.
The Lifetime ISA also remains capped at £4,000 a year in 2024/25 and counts towards your total allowance.
The annual ISA allowance is still £20,000 for now (2024/25). However, if after the consultation period, the Treasury greenlights the British ISA, there may be an increase in the annual ISA allowance.
The British ISA is under consultation and could increase the ISA allowance
In the Spring Budget, the chancellor announced the proposal for a new British ISA.
The British ISA will not come into effect on 6 April. Rather, it is under consultation until 6 June, during which time the City and the Treasury will develop plans for its design and implementation.
If the British ISA is greenlit, you will be able to invest an additional £5,000 a year into UK equities, with the same tax advantages as the current ISAs. This means that, if the British ISA is to go ahead, the annual ISA allowance could increase to £25,000.
If you already used your £20,000 allowance, you would have to invest the additional £5,000 into a British ISA.
Although the consultation period for the British ISA runs until June, there has been no further announcement as to when you would be able to open one if it were to get the green light.
Get in touch
If you would like to find out how your ISAs can help put you on track to achieve your financial goals, get in touch.
Email admin@stonegatewealth.co.uk or call us on 01785 876222.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
This article is for information only. Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
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