The Individual Savings Account (ISA) celebrates its 25th birthday on 6 April 2024. Despite some early criticism when they were first introduced in 1999, ISAs have become incredibly popular because they offer several flexible options for tax-efficient saving and investing.

Indeed, according to figures from the UK government, adults paid £66.9 billion into ISAs in the 2021/22 tax year.

ISAs may be an important part of your financial plan, as you don’t pay Income Tax, Capital Gains Tax (CGT), or Dividend Tax on interest or returns generated from wealth held in an ISA wrapper.

This could be especially beneficial from 6 April 2024 as the CGT Annual Exempt Amount and the Dividend Allowance will both halve. As a result, you may pay more tax on your non-ISA investments.

So, it could be more important than ever to take full advantage of the tax benefits of ISAs. However, you may be unaware of an impending overhaul of the ISA landscape at the start of the 2024/25 tax year.

Jeremy Hunt announced several ISA reforms in his 2023 Autumn Statement. Yet, MoneyAge reports that 78% of people surveyed were unaware of how the rules would change on 6 April 2024.

If you’re not up to date on the latest developments, you may miss opportunities to take full advantage of your ISAs in the coming tax year.

Read on to learn how you could benefit from upcoming changes to the ISA landscape.

You will be able to pay into the same type of ISA with multiple providers

In the 2023/24 tax year, you have a £20,000 allowance that you can split across several different types of ISA. However, you can’t pay into more than one of the same type of ISA.

For instance, you can contribute to a Cash ISA and a Stocks and Shares ISA in the same tax year, but you can’t pay into two Cash ISAs.

Fortunately, this rule will change on 6 April 2024, meaning that you will be allowed to pay into the same type of ISA with multiple providers in a single tax year.

As a result, you will have the freedom to shop around for the best interest rates on a Cash ISA and move your wealth around whenever you like. This could help you maximise the interest that you generate.

Additionally, you will be able to split your savings between different types of Cash ISA. For example, you might hold a portion of your savings in a fixed-term ISA to secure a higher interest rate, while keeping the rest in an easy access ISA to use as an emergency fund.

The change may also protect savers who accidentally pay into more than one ISA in the same tax year. This could happen if you have a direct debit set up to make contributions to an old ISA, and you open a new one with a different provider.

Having the flexibility to pay into more than one of the same type of ISA means you would not risk breaking the rules if you made this mistake.

Partial transfers between providers will be allowed

You may want to transfer funds in your ISA to a different provider for several reasons. Perhaps you can get a better interest rate on your Cash ISA? Alternatively, you might decide to invest the wealth through a Stocks and Shares ISA instead of holding it in cash.

In the 2023/24 tax year, you are free to open a new ISA and transfer your funds into it, provided you follow the existing rules about ISA subscriptions. You can also move wealth between different types of ISA.

However, you must transfer all the savings from the old ISA into the new one.

Yet, from 6 April 2024, you’ll be able to make partial transfers. This gives you added flexibility to move your wealth between ISAs and hold your savings in ways that are best suited to your financial goals.

Certain fractional shares will be permitted in ISAs

The introduction of fractional shares helped lower the barrier to entry for investors. You simply buy a “fraction” of a share instead of a full one.

This could allow investors to buy into companies that they otherwise would have been unable to access due to the high share price. For instance, the London Stock Exchange reports that the stock price for Intertek Group, a global quality assurance provider, was £4,912 on 5 March 2024.

If you only want to invest £2,000, you wouldn’t be able to purchase a full share, but you could buy a fractional share.

In 2023/24, fractional shares are not permitted in a Stocks and Shares ISA, but Jeremy Hunt said that he plans to change this and allow certain fractional shares from 2024/25 onwards.

The proposed change could make it easier for you to diversify your portfolio as you may be able to purchase fractional shares in a wider range of companies without having to increase the amount you invest.

This may be especially beneficial if you make smaller, regular contributions each month instead of investing a single lump sum each year.

The government plans to introduce a new “British ISA” in the future

In the 2024 Spring Budget, Jeremy Hunt announced further changes to the ISA landscape in the future.

The government plans to introduce a “British ISA” giving savers an additional £5,000 ISA allowance on top of their existing £20,000. You will only be able to invest this allowance in UK companies.

The British ISA could allow you to make more tax-efficient investments if you’ve used your £20,000 allowance. However, the government are yet to announce the full details of how the new ISA will work, or when it will be available.

Get in touch

We can discuss ways to take advantage of these changes to ISA rules, so you can potentially grow your wealth faster.

Please contact us at hello@ardentuk.com or call 01904 655 330. As an award-winning financial advice company that was a 2022 VouchedFor Top Rated firm, you can be sure that we’re a bona fide company providing excellent advice and high-quality service.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.