News / Financial planning

New rules for ISAs

ISAs (Individual Savings Accounts) are a highly tax-efficient way to save and invest. This year, changes to ISA rules come into force to help make things more flexible for investors. Jack Lear, our UK Financial Planning Manager, explores what’s changing.

On 6 April 2024, at the start of the next tax year, a number of changes to ISA rules take effect. ISAs are a popular way to save and have proved a useful addition to many UK investment portfolios given their accessibility and tax advantages.

There are a range of different ISAs currently available:

  1. Cash ISA
  2. Stocks and shares ISA
  3. Innovative Finance ISA
  4. Lifetime ISA
  5. Junior ISA

What’s changing?

Most of the changes which are being made are helpful, and increase flexibility, meaning ISAs will be much easier to use. Here’s a quick overview of the updates:

  • Multiple subscriptions allowed – currently you can only pay into one ISA of each type in any tax year. This will change from 6 April allowing cash savers to open a new cash ISA if a better rate becomes available. This will mean you can opt for a fixed-rate ISA for some of your funds with the rest held in an easy-access cash ISA.
  • Different providers – it will be possible to spread investments across different ISA providers.
  • Easier transfers – partial transfers will be possible; until now the entire fund needed to be transferred from one subscription to another.
  • Less admin – if you have an ISA, but didn’t make a contribution last year, there will no longer be a need to go through a fresh application.
  • Wider choice – the range of investments for the Innovative Finance ISA is being expanded.

It’s also likely that fractional shares will be allowed within ISAs. Although the details are yet to be announced, this could allow investors who were previously unable to afford certain shares to include them in their ISA portfolio.

Are there any drawbacks?

Until now those aged 16 and 17 have been able to hold both a JISA (with funds of up to £9,000) alongside a cash ISA (with an annual allowance of up to £20,000) allowing a total investment of up to £58,000 over two years. The loophole is closing on 6 April although it’s still possible until this date to open an adult cash ISA alongside a JISA. If you’re saving for your children or grandchildren who are 16 or 17, or want to share an early inheritance, this could be a good option.

Sadly, there won’t be any changes to the £20,000 ISA allowance, and the £9,000 Junior ISA and £4,000 Lifetime ISA limits also stay the same.

With allowances for dividends and Capital Gains Tax halving in 2024 (to £500 and £3,000 respectively) ISAs are a useful way to shelter some of your capital, especially if you may otherwise be paying more tax than in previous years.

To discuss any aspect of your investment portfolio, please contact your nearest office.