The 2024/25 tax year ushered in a few notable changes to Individual Savings Accounts (ISAs), affecting the amount you can transfer between accounts and how many accounts you can open in any one year.
In this article, we explain what the changes to ISAs mean for you.
Can I open multiple ISAs of the same type?
The rules around how you use your annual ISA allowance are quite specific. Your annual allowance is the amount that you can deposit into your ISAs each tax year and not pay tax on any of the returns, and in the current tax year is £20,000.
In the previous 2023/24 tax year, you could spread this allowance over the three different kinds of ISA (cash, stocks and shares or innovative finance ISAs) but you couldn’t pay into more than one of the same type. So, for example, you could deposit £10,000 into a cash ISA and £10,000 into a stocks and shares ISA, but not £10,000 into two different cash ISAs.
However, the rules changed from 6 April 2024 so that you can now open and make a deposit into multiple accounts of the same ISA type in a single tax year, meaning you will have much more freedom over how you use your allowance. For example, you may wish to pay into a variable rate Cash ISA and a fixed rate Cash ISA , or you may simply wish to keep your investments diverse by making use of different stocks and shares ISA providers.
You can read more about how the different types of ISA work in our article Everything you need to know about ISAs.
Remember that it’s important never to invest in anything you don’t understand, so if you want personal recommendations based on your attitude to risk and your investment timeframe, you may want to seek professional financial advice.
You can find a local financial advisor on VouchedFor or Unbiased, or for more information, check out our guide on How to find the right financial advisor for you.
Can I transfer my ISA balance?
Last year’s taxt rules around transferring your funds from one ISA to another stipulated that, if the ISA was opened in a previous tax year, you could transfer some or all of it across to a new provider. However, if the ISA was opened in the same tax year, you had to transfer all of it.
Since 6 April, however, you can now make partial transfers from an ISA opened in the same tax year, instead of having to transfer the whole balance.
However, bear in mind that not every ISA provider will allow you to make transfers, so always check a provider’s terms before signing up. Alternatively, you can make a withdrawal and deposit your money into another ISA yourself, but this will eat into your annual allowance, so do so at your own risk.
Learn more about transferring your ISA in our article ISA transfers: what are the rules?.
What is the British ISA?
The government plans to consult on the introduction of a new “British ISA” to encourage investment in UK-based businesses. This would come with its own £5,000 annual allowance, separate from the existing £20,000 allowance.
Further details, such as how this ISA will function in practice and a timeline for implementation are not known, though experts say not to expect it any time soon.
Can I invest in fractional shares through an ISA?
Investing in a “fractional” share refers to buying part of a share rather than a whole one – you might do this because you can’t afford a full share, for instance, or because you would rather buy lots of fractional shares than a few full ones to diversify your investments.
Current rules don’t allow you to buy or hold fractional shares within a stocks and shares ISA, but this is due to be permitted in certain cases. It is unknown when and how this change will be implemented, however.
Learn more about ISAs
Individual Savings Accounts are a tax-efficient way to invest your money, and are well worth learning about if you are new to investing . Whatever returns you make from an ISA, either from interest on your cash or investments, or from selling shares, will be shielded from the taxman, as long as you stay within your annual allowance.
Check out our section on ISAs to learn more, or get up to speed on more financial changes taking effect in the UK in April with our 2024 Money Calendar.
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