Have you heard about the new ISA rules?

new ISA rules

From April 2024, some significant changes will be made to ISAs (individual savings accounts). If you haven’t heard about the new ISA rules, we have summarised them below.

Changes to ISAs

  • The minimum age for opening an ISA increases to 18
    From April, you will only be able to open an adult cash ISA from the age of 18. So, if you want to fully utilise the cash ISA allowance for children aged 16 – 17, this must be done before the end of the tax year. Children of this age can still open and save into a Junior ISA, however, the annual tax-free allowance is a lot less at £9,000.
  • Partial ISA transfers will be allowed
    A further change to the ISA rules involves the ability to transfer part of your account between ISAs, despite when the money was paid in. Until now, the current rules stated this needed to be transferred in their entirety from the current tax year only. This new rule will enable you to keep some ISA funds with an existing provider.
  • End of the single ISA limit
    You will be able to open multiple ISAs of the same type each year instead of previously only being able to put money into one type of ISA. This change should help people to save and move more easily between different ISA providers, making the landscape more competitive. At the time of writing, cash ISAs are still seeing high rates of AER.
  • Dormant ISAs won’t require you to reapply
    The previous rules required people to reapply for their ISA if their account had been dormant for a tax year. Starting in April, this rule will be scrapped. So, your ISA account will stay open and ready for you to use as and when required.
  • Innovative Finance ISA to include extra funds
    The permitted investments allowed for Innovative Finance ISAs have expanded. This ISA will now include open-ended property funds with extended notice periods and long-term asset funds, which will result in a more comprehensive investment portfolio.

ISAs as a savings strategy

An ISA is an ‘individual savings account’, which enables you to save up to £20,000 tax free each year. There are several different types of adult ISA and there’s a Junior ISA for children. Each ISA has its own terms, and some have smaller allowances than the annual standard. Overall, an ISA is a useful addition to a diverse savings and investments strategy.

The latest changes to the ISA rules are the biggest shake up in 15 years. With the aim of making the ISA market more competitive, this offers attractive opportunities for savers. As a tax-free saving account, it offers a useful way to reduce your tax burden.

Being able to divide your savings between multiple cash ISAs and stocks and shares ISAs offers greater savings flexibility. Partial transfers are also beneficial to ensure you can keep some money in an existing ISA rather than having to transfer your whole account.

Financial Advisers, Nottingham and Lincoln

The ISA you choose may vary depending on your age, situation and objectives. You will need to consider timescales and how soon you’ll want to access your savings. If you’re going to invest in a stocks and shares ISA, then you will also need to consider your risk tolerance.

At Balance: Wealth Planning, our financial planners can advise you on a suitable savings and investments strategy. Whether you want to grow a savings pot or generate income for the future, we can help you achieve your financial goals.

If you would like advice on ISAs and savings strategies, get in touch to speak to our financial planning team.