ISAs are a great option to make investing as tax-efficient as possible. Once money is paid into an ISA, it’s then sheltered from both UK income and capital gains tax.
Over the years, we’ve seen different types of ISAs launched and tweaks to ISA rules and regulations. Next tax year (or later this week) ISA rules are changing again.
Frozen Allowances
The overall ISA allowance is staying at £20,000 per tax year.
You can currently split your allowance between a Stocks and Shares ISA, a Cash ISA, an Innovative Finance ISA and a Lifetime ISA (up to £4,000 per tax year which counts towards the overall £20,000 limit).
The Junior ISA allowance will also stay at £9,000.
Flexibility
This will make it easier to have ISAs of the same type in different places in the same tax year. It could offer Cash ISA savers the chance to go after more competitive rates more easily, or pick and mix easy access and fixed rates.
It also helps protect those who accidentally pay into more than one of the same type of ISA in a single tax year. This is easy to do when you pay into an ISA by Direct Debit. The change removes that risk of breaking the rules.
This rule change doesn’t apply to the Lifetime ISA or Junior ISA.
You can still only subscribe to one Lifetime ISA a year. And you can only open one type of each Junior ISA (Cash and Stocks and Shares) for a child.
Partial Transfers
In a similar way, this will give ISA savers and investors greater flexibility and control (from April 2024). The rules currently force an all-or-nothing approach to current year ISA transfers – you have to transfer your entire ISA of that type from the current tax year, or nothing at all.
No Reapplying
ISA savers and investors are currently required to, in essence, reapply for ISAs they already hold when there’s been a gap of one tax year where no subscriptions were paid. Removing this rule should reduce the potential for confusion and cut down on unnecessary red tape.
New Age Limit
This rule only directly impacts Cash ISAs, where the minimum age for opening an account is currently 16 years old. The 18+ rule will mirror other adult ISAs from April 2024. 16 and 17-year olds will continue to be able to open and save into a Junior ISA.
To ensure you are maximising your ISA allowances, talk to one of our FCA authorised wealth managers by arranging a Discovery Call [Here]
This article is for informational purpose only. It does not constitute finacial, tax or legal advice, nor is it a recommendation to buy, sell or hold any investment. Past performance is not a guide to the future, investments rise and fall so investors could make a loss. No view is given on the present, future value or price of any investment and investors should form their own view on any proposed investment.