ISAs
April 2024 ISA changes – are you up to speed?
5 min read 2 Apr 24
This tax year, 6 April 2024, sees the introduction of significant ISA reform. This was first announced in last year’s Autumn Statement, when Jeremy Hunt set out plans to overhaul how the tax-free savings system works. The changes aim to improve flexibility and simplify things in a major shake-up.
A lot’s happening, so ensuring you’re up-to-date is always a good idea. Although this article gives a recap of the changes, the views expressed here should not be taken as recommendation, advice or forecast. If you’re unsure about anything, you should speak to your financial adviser before you act. If you don’t already have a financial adviser, our ‘Get financial advice’ page can help you find one.
Wave goodbye to the single ISA limit
Previously you could only pay into one ISA of the same type each tax year. That’s been scrapped. Going forward, you’ll be able to pay into as many Cash, Stocks and Shares, and Innovative Finance ISA accounts as you like (although a limit of one Lifetime ISA remains).
It’s welcome news – and could help you make better use of the £20,000 yearly ISA allowance. For example, cash savers might be in an improved position to take advantage of better interest rates when they pop up. Meanwhile, investors may have greater freedom to experience what other providers have to offer, such as fund ranges. Exploring what’s available elsewhere could help you find a better fit. Just make sure to keep track of your different ISA accounts and what you’re paying in, so as not to exceed your £20,000 yearly ISA allowance.
In a nutshell, the system aims to be less restrictive and hands more power back to you. Less red tape could also mean increased competition amongst providers, which can be a good thing for customers.
Say hello to more flexible partial transfers
You could only transfer partial amounts on money you’ve paid in before the current tax year. If you wanted to transfer money you’d paid in during the current tax year, you’d have to do so in full, or transfer nothing at all. From 6 April 2024, this rule doesn’t apply anymore. Instead, revised plans aim to allow partial transfers to other ISAs regardless of when the money was paid in.
This will remain at ISA providers’ discretion, though. Either way, it’s a refreshing change and has the potential to make everything a lot more straightforward.
If you’re looking to make a transfer, first check with your existing ISA provider what partial sums they’ll allow. And do the same with the provider you’re looking to transfer to. When you’re happy to go ahead, simply give your new ISA provider your transfer instruction and they'll do the hard work for you. This includes contacting your existing ISA provider and managing the transfer on your behalf.
A change in minimum age for cash ISAs
The minimum age for opening a Cash ISA has changed from 16 to 18. This brings it in line with other types of ISA where the existing minimum age is already 18. Young people will continue to be able to pay into a Junior ISA until they reach 18, for which the tax-free limit remains at £9,000.
More flexible investing
Under the previous tax year rules, those investing in a Stocks and Shares ISA must hold at least one full share in a company. This can be pricey – considering a single share in some of the biggest companies can cost hundreds. Going forward, new ISA rules mean you’ll be able to hold ‘part of a share’ – otherwise known as a ‘fractional share’. This could lead to improved investment opportunities. Again, this will remain at ISA providers’ discretion, and what’s offered will vary.
No need to ‘reapply’
If you held an ISA but hadn’t contributed any payments during the previous tax year, you’d effectively have to ‘reapply’ in order to begin doing so again. It’s a confusing rule and one that’s now been abandoned. Although, like some of the changes previously mentioned, it will remain up to ISA providers whether or not to implement this. That being said, it’s still a refreshing tweak and could make things a lot more hassle free.
April 2024 marked the ISA’s 25 year anniversary, with the planned changes certainly an apt way to mark the occasion. There are lots of positives here, and although certain aspects aren’t mandatory for ISA providers to adopt, it feels like a step in the right direction. The ISA allowance for 2024/2025 remains fixed at £20,000 of which you can continue to split between the different ISA types – Cash, Stocks and Shares, Innovative Finance and Lifetime. The limit you can pay into a Lifetime ISA has also stayed the same at £4,000.
It’s important to remember that ISA tax rules may change in the future. The tax advantages of investing through an ISA will also depend on your personal circumstances.
The introduction of a new UK ISA
Also announced in the 2024 Spring Budget, Jeremy Hunt unveiled that a new type of ISA – the UK ISA – may be on the horizon. The aim is to encourage investment into UK companies with an additional tax-free limit of £5,000. This would be on top of the existing £20,000 ISA allowance, taking the total to £25,000. Further details remain to be seen.
Please note that The M&G ISA is a Stocks and Shares ISA only. Find out more about The M&G ISA and Junior ISA here.