ISA changes happening this year: What do they mean for me?

Saving and investing your money tax-efficiently can help you make the most of your wealth.

ISAs allow you to invest up to £20,000 each tax year (2024/25) without paying Income Tax, tax on dividends, or Capital Gains Tax on any interest or profits you earn.

You may have seen the announcement of plans for a new “British ISA” in the news after the chancellor’s Spring Budget, which would allow an additional £5,000 of tax-efficient investment in British-focused assets.

However, some equally important changes have come into place that were less publicised.

If you hold money in ISAs, read on to learn about five key changes that came into effect on 6 April 2024.

1. Multiple subscriptions could allow you to take advantage of the most competitive rates

There are four main types of adult ISA you could subscribe to:

• Cash ISA
• Stocks and Shares ISA
• Lifetime ISA
• Innovative Finance ISA.

Previously, you could only open and pay into one ISA of each type in the same tax year.

Happily, since 6 April, you can now take out multiple subscriptions of the same type of ISA. For example, you could contribute to two Stocks and Shares ISAs, each with a different provider.

This greater flexibility could allow you to take advantage of the most competitive rates. It could also prevent you from accidentally breaking the rules by paying into multiple ISAs of the same type, which may be surprisingly easy to do if you make your contributions via Direct Debit.

2. Partial transfers may offer you more flexible control over your savings and investments

Previously, the ISA transfer rules were all-or-nothing – you could transfer your entire ISA to another provider in a single tax year, or none at all.

This rule could be restrictive for savers and investors – once you’d paid funds into an ISA, they were committed for the full tax year, unless you were willing to transfer your entire subscription to another provider.

The new rules allow you to transfer however much of your ISA balance as you choose to a new provider, regardless of when you made the subscription.

This could give you greater flexibility in how you manage your ISA savings and investments.

For example, if you have £25,000 in a Cash ISA and you want to transfer £5,000 to a different provider, you can now do so.

Alternatively, you might choose to spread your money between different Stocks and Shares ISAs to help you diversify your portfolio – as each provider may have access to different investment funds.

In simple terms, this new rule gives you the freedom to move your ISA subscription around depending on your current situation. This means that you can respond to opportunities as they arise and invest in a way that aligns with your long-term financial plan.

3. Removal of the need to reapply for existing dormant ISAs means less red tape

Previously, if you didn’t pay into an ISA for a full tax year, you’d effectively have to reapply for it to resume payments.

Now this rule has been removed, you can pause your contributions for a while without having to wade through the red tape of reapplying when you want to start paying into your ISA again.

This could potentially save you considerable time, stress, and effort, as the reapplication process can often be fairly long-winded.

You may have been required to provide all the forms necessary for opening an ISA again, including passing stringent identity checks.

So, the removal of this rule may be welcome news to many savers and investors.

4. Greater choice of investments for Innovative Finance ISAs could make them more attractive

An Innovative Finance ISA (IFISA) allows you to invest in peer-to-peer lending and crowdfunding. Historically, IFISAs have been seen as fairly niche and not used by many.

The recent changes allow you to put new types of assets in your IFISA – Long-Term Asset Funds and Property Authorised Investment Funds – in addition to the existing peer-to-peer loans.

This greater choice offers the ability to tailor investments to align with your financial plan and long-term goals, potentially making them a more attractive option.

That said, IFISAs often involve a higher level of investment risk, with limited protections if the borrower defaults, so they aren’t suitable for everyone. Equally, they may also offer the potential for higher returns.

A financial planner can help you understand your appetite for risk and choose your investments accordingly.

5. An increase in the minimum age for Cash ISAs closes the Junior ISA loophole

Before 6 April, the minimum age for opening an adult Cash ISA was 16. It has now been raised to 18.

This means that if you want to open an ISA for your child or grandchild, you’ll need to opt for a Junior ISA (JISA) if they’re under the age of 18.

A JISA is a tax-efficient account opened in the name of a child under 18. They have a separate JISA allowance (£9,000 in 2024/25) and you can save in a Cash JISA, invest through a Stocks and Shares JISA, or split the allowance between the two. A JISA is then automatically converted into an adult ISA when the holder turns 18.

The minimum age change closes the JISA “loophole” as, previously, your child or grandchild (or someone on their behalf) could pay up to £9,000 a year into a JISA and up to £20,000 into an adult Cash ISA once they turned 16. That meant they could save a total of £29,000 tax-efficiently each tax year between the ages of 16 and 18.

Under the new rules, this is no longer possible. So, if you want to tax-efficiently save for someone between 16 and 18, you will now only be able to do so in a Cash JISA.

Get in touch

If you’d like to learn more about how the recent ISA changes could affect your financial plan, please contact us by email at info@lloydosullivan.co.uk or call 020 8941 9779 to see how we can help you.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients 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.

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.