With the new tax year now well underway, it is worth looking at the key changes that have come into place since 6 April and how you can organise your wealth around them.
ISAs in particular have been a focus for the government in the 2024/25 tax year, with various changes made to these savings and investment accounts.
Each tax year, you can contribute money into these accounts up to the annual ISA allowance (£20,000 in 2024/25). ISA savings and investments attract no Income Tax, Dividend Tax, or Capital Gains Tax (CGT) on any interest or returns generated, making them highly tax-efficient.
As a result, you may well use ISAs to tax-efficiently save and invest for your future. So, it is crucial to familiarise yourself with the latest updates, ensuring you can make the most of your ISA savings.
Read on to find out about some of the key ISA changes that have come into place in the new tax year.
You can now pay into multiple ISAs of the same type in a single tax year
Previously, you could only pay into one type of each ISA in a single tax year. So, if you opened a Cash ISA after 6 April, you could not have opened and started paying into another one.
Meanwhile, if you already had a Cash ISA from a previous tax year, you could open another one in the new tax year. But, you could not have paid into both in the same financial year.
Now, you can open multiple ISAs of the same type. This offers greater flexibility, as it means you could choose a more appropriate account for your money.
For example, if you already have a Cash ISA that you have paid into this year and see another one with a higher interest rate, you can open and pay into it in the same tax year with no penalty (assuming you are still within the ISA allowance).
Similarly, you might already have a Stocks and Shares ISA, but find that a different provider offers access to specific investments through its ISA that you are interested in. In that case, you could pay into your existing ISA, while freely opening a new one with this other provider.
This could offer greater flexibility in how you save and invest your money.
You can transfer a portion of your ISA to another account
Alongside being able to open another of the same type of ISA, you can now also transfer part of your ISA holdings to another account.
If you wanted to move your ISA to another account or provider before this tax year, you would have had to move all of your current tax year subscriptions (but could move all or part of subscriptions from previous years).
But, since 6 April, you can now move a part of your ISA holdings into your account while leaving the remaining portion where it is, regardless of whether the funds relate to the current tax year or from subscriptions made in previous years.
Again, this offers additional flexibility, allowing you to move a portion of your ISA holdings, or several different portions to wherever you want.
The minimum age for Cash ISAs has been raised from 16 to 18
A particularly interesting change coming into place this year is the increase to the minimum age for Cash ISAs from 16 to 18. This is because, before 6 April 2024, there was a small “loophole” in the ISA rules relating to savings held for a child.
You can open a Junior ISA (JISA) for a child under the age of 18. These are held in the name of the child and have a separate JISA allowance (£9,000 in 2024/25). You can open a Cash JISA and a Stocks and Shares JISA, and split this allowance between the two as you see fit.
However, there was previously a slight inconsistency in the rules as, while you could not open a Stocks and Shares ISA before age 18, you could open an adult Cash ISA from age 16. This meant that those between 16 and 18 could open both a Cash JISA and a Cash ISA at once, essentially enabling them to save up to £29,000 tax-efficiently in the tax years between their 16th and 18th birthdays.
However, raising the minimum age for Cash ISAs to 18 solves this dilemma. Now, those between 16 and 18 can save up to the JISA allowance into a Cash JISA until they turn 18, at which point the account will automatically be converted into an adult ISA. They can then benefit from the full ISA allowance.
The drawback here for you is that you can now only save for a child or grandchild in a JISA with its lower annual allowance of £9,000. Even so, this is still a fair amount you can contribute to help set up your child or grandchild for their financial future.
There will be transitional arrangements until 5 April 2026 for those who are currently 16 or 17 and either already have an adult Cash ISA, or who were planning to open one between these two years.
The government is holding consultations on a new “UK ISA”
One key change announced during the Spring Budget in March that is yet to come into place is a consultation on a new “UK ISA”.
The UK ISA, or “British ISA”, will allow an additional £5,000 of tax-efficient investment on top of the standard £20,000 ISA allowance, provided that the investments are made in “UK-focused assets”.
The goal of the expanded allowance is to encourage investment into the UK economy, boosting businesses and growth.
This could be a benefit to you because, if the UK ISA is introduced, it would allow you to tax-efficiently save and invest up to £25,000 a year.
Of course, it is worth bearing in mind that even if the UK ISA does come into place, it does not mean it is necessarily useful to you. For example, you might already invest as much of your wealth as you would like, and so would prefer not to take on any more risk.
Similarly, increasing your UK-based investments could actually be an issue for your diversification. It is often sensible to spread investments across a variety of sectors, regions, and locations so that you are not overexposed to a fall in the market of any particular asset, industry, or country.
As a result, making the most of the additional allowance afforded by the UK ISA might mean you are overweight in UK assets compared to the rest of your portfolio.
Even so, it may still be useful if you want to increase the amount you can tax-efficiently invest each year.
The government is consulting on the introduction of the UK ISA until 6 June. It is worth keeping an eye on whether this does come into place as it may mean you can tax-efficiently invest more of your money, provided it is appropriate for you to do so.
Get in touch
If you would like to find out more about saving and investing for your future, then please do get in touch with us at DBL Asset Management.
Email enquiries@dbl-am.com or call 01625 529 499 to speak to us today.
Please note
This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.
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.
