What are the new ISA rules for 2024?
As of April 6th, 2024, Chancellor Jeremy Hunt has implemented new ISA rules that aim to boost UK investment and offer tax-free incentives for savers. These changes have significant implications for how you can save and invest money in ISAs, so let’s dive into the details together.
Opening multiple ISAs of the same type in the same tax year
One of the biggest changes to the ISA rules is the ability to open more than one ISA of the same type within the same tax year. This means that if you have already opened a Cash ISA for the year, you can now also open another Cash ISA with a different provider if you wish. This flexibility can help you maximize your tax-free savings potential and take advantage of different interest rates and offers.
Partial transfers between ISA providers
Another important change is the ability to make partial transfers between ISA providers, even within the same tax year. This means that if you find a better deal or interest rate at a different provider, you can move part of your ISA savings without losing the tax-free status of the funds. This added flexibility allows you to shop around for the best ISA deals without worrying about penalties or loss of tax benefits.
Dormant ISAs no longer need yearly reapplications
Under the new rules, dormant ISAs no longer need to be reapplied for each year. If you have an ISA that you haven’t contributed to or used for a while, it will remain open and active without the need for annual reactivation. This change makes it easier to manage multiple ISAs over time and ensures that your savings remain tax-efficient even if you take a break from contributing.
What are the changes to ISA limits and allowances?
British ISA limit raised to £25,000
One of the most significant changes to ISAs in 2024 is the increase in the British ISA limit to £25,000. This means that you can now save up to £25,000 across all your ISAs in a single tax year, up from the previous limit of £20,000. This higher limit gives you more flexibility to maximize your tax-free savings and investments, helping you reach your financial goals faster.
| Type of ISA | Old Limit | New Limit |
|---|---|---|
| Cash ISA | £20,000 | £25,000 |
| Stocks & Shares ISA | £20,000 | £25,000 |
| Lifetime ISA | £4,000 | £4,000 |
| Junior ISA | £9,000 | £9,000 |
Additional £5,000 allowance for UK equities
In addition to the increased overall limit, there is now an additional £5,000 allowance specifically for UK equities within your ISA. This means that you can invest up to £5,000 in UK-listed companies, funds, or securities while still enjoying tax-free returns. This incentive aims to promote investment in the UK market and support British businesses, offering you more opportunities to diversify your portfolio and potentially earn higher returns.
New assets eligible for IFISAs
Under the new rules, Innovative Finance ISAs (IFISAs) can now include new assets like Long-Term Asset Funds (LTAFs) and Property Authorised Investment Funds (PAIFs). These alternative investments offer different risk profiles and potential returns compared to traditional Cash and Stocks & Shares ISAs, allowing you to further diversify your portfolio and potentially access higher yields. The expanded range of eligible assets gives you more options to tailor your ISA investments to your financial goals and risk tolerance.
What changes are happening to Junior ISAs?
Closure of the loophole for 16 and 17-year-olds
One important change to Junior ISAs is the closure of the loophole that allowed 16 and 17-year-olds to invest up to £29,000 in a tax-efficient manner. Starting from the 2024/25 tax year, 16 and 17-year-olds will be subject to the standard Junior ISA allowance of £9,000, bringing their limit in line with younger children. While this change may impact older teenagers looking to save and invest, it ensures consistency and fairness across Junior ISA holders of all ages.
Key aspects remaining the same
Despite the various updates to ISA rules in 2024, key aspects of ISAs like the Lifetime ISA, Junior ISA, and standard ISA allowances will remain the same. For example, the annual allowance for Lifetime ISAs will stay at £4,000, allowing savers to benefit from the government bonus towards their first home or retirement savings. Similarly, the Junior ISA limit will remain at £9,000, providing a tax-efficient way for parents and guardians to save for their child’s future. These consistent features offer stability and predictability for ISA holders, ensuring that they can continue to plan and save effectively within the tax-free wrapper of ISAs.