Did you know accountants play a crucial role in helping individuals navigate ISA rule changes? Here at EKW Group, our proficiency in this area equips our clients with the necessary insights to make well-informed decisions concerning ISAs. We prioritise optimising tax efficiency and aligning strategies with their financial goals, ensuring they can navigate any changes effectively. So, what exactly are the changes?
ISAs are widely recognised as popular and easily accessible saving tools, known for their tax-advantaged status. Currently, there are five available types of ISAs:
- Cash ISA
- Stocks and shares ISA
- Innovative finance ISA
- Lifetime ISA
- Junior ISA
What are the changes?
As announced in November, the changes to ISAs include:
- Starting 6th April 2024, individuals will have the option to subscribe to multiple ISAs of the same type within a single tax year, changing from the previous rule of one ISA per type annually.
- Partial transfers of current tax year ISAs will be permitted, marking a departure from the previous requirement of transferring the entire subscription.
- For existing ISAs without contributions in the preceding tax year, a fresh ISA application will no longer be necessary.
- The Innovative Finance ISA will see an expansion in the range of eligible investments.
- Discussions are underway with ISA managers regarding the inclusion of fractional shares within ISAs. This initiative aims to enable investors who couldn’t previously afford certain shares to purchase them.
Additionally, from 6th April, the Dividend Allowance and the Captial Gains Tax (CGT) annual exemption will both be halved, reducing to £500 and £3,000 respectively. This could have significant implications, potentially resulting in higher tax payments compared to previous years.
ISAs continue to offer the advantage of being exempt from UK Income Tax and CGT, making them highly efficient tools for building and increasing long-term wealth. Currently, Capital Gains Tax rates stand at 10% or 20%, contingent on your other taxable income, which could lead to substantial savings upon selling assets.
The British ISA
More recently, the Chancellor announced in the Spring Budget that a new ‘British ISA’ will be introduced. This ISA will allow individuals to invest an additional £5,000 a year which will be tax-free. This comes as Britons can currently only save or invest in up to £20,000 in each tax year. However, the extra allowance must only be spent on UK assets aiming to encourage more UK investment.
The government is also freezing the limits on Junior Individual Savings Accounts (£9,000), Lifetime Individual Savings Accounts (£4,000 excluding government bonus) and Child Trust Funds (£9,000) for 2024/25.
The implementation date for the British ISA is unknown with a consultation still ongoing which will run until 6th June. It’s likely we won’t see the new ISA until April 2025, however, with a general election on the horizon, no one is sure when – or if -it will be introduced.
These ISA developments underscore the government’s commitment to empower individuals to secure their financial futures. The overarching message is clear: seize the opportunity to optimise your savings and investment strategies.
If you would benefit from our expertise surrounding ISAs or any other queries, please don’t hesitate to get in touch with a member of our team on 01942 816512 or email:
Chris Barlow, Tax Manager: [email protected]
