13 March 2024 , 09:11
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Savers should be aware of big ISA changes that are due to kick in from this April.
An ISA is a type of savings account where the interest you earn is protected from tax. It stands for Individual Savings Account. The different types of ISAs already available are: Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs, Lifetime ISAs and Junior ISAs.
Each tax year, you get an ISA allowance of £20,000 - although there are some accounts where the limit is smaller than this. For example, you can only save £4,000 each tax year in a Lifetime ISA, or if you’re saving into a Junior ISA for your child, the limit is £9,000 each tax year.
However, any money you save into a Junior ISA does not affect your own £20,000 allowance. At the moment, you’re only able to pay into just one ISA of each type per tax year - but this rule will be ripped up from April 6.
It means savers will be able to subscribe to multiple ISAs of the same type, apart from the Lifetime ISA, within the same tax year. It will allow savers will be able to open new ISAs as new deals with better interest rates become available.
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As well as this, you will also be able to do partial transfers of ISA funds no matter when you paid the money in. Under current rules, you need to transfer the full amount if you're moving money from the current tax year. But it is worth noting you still won’t be able to pay in more than your annual ISA allowance.
The other change to be aware of, is the age for when you can open a Cash ISA is changing. At the moment, you can open a Cash ISA when you turn 16, but this will to 18 from April 6.
As part of his Spring Budget last week, Chancellor Jeremy Hunt also announced plans to launch a consultation on a British ISA. The new savings product would give people an extra £5,000 tax-free limit, on top of the existing £20,000 ISA allowance, to encourage people to invest in British businesses.
It is important to know your investment could rise and fall in value, as your return would depend on how well the businesses you're invested in are performing, so you could get back less than you put in. It is also not clear year when the British ISA could potentially be launched.