In yesterday's Autumn Budget Statement, Chancellor Jeremy Hunt unveiled the tax and spending priorities for the UK Government for the upcoming year — including key changes to Individual Savings Accounts (ISAs).
These include enabling depositors to fund several ISAs of the same kind in a single year.
Here's how to take full advantage of the new regulations, as well as other investing changes to be mindful of.
Paying into multiple Isas will be allowed, but allowance will be frozen
You will be allowed to open and fund as many ISAs as you want from April 2024.
There are five types of ISA — cash ISAs, stocks and shares ISAs, Lifetime ISAs, innovative finance ISAs, and Junior ISAs. You can currently choose whether you want to invest the whole up to £20,000 annual ISA allowance into one type of ISA, or whether you want to split it between the different types.
But next year's changes mean you will be able to invest in more than one of any of these in a given tax year. As such, you will benefit from lower platform fees for investing, a larger selection of funds, or bonuses for signing up.
Additionally, you can move money invested in the current tax year if you want. As the Money Saving Expert website reports, currently, you can only do partial transfers of funds that you've paid into before the current tax year.
Therefore, if you want to move money you've paid in since April 6, you need to do so in full. For example, from next April, if you've £15,000 in a cash ISA and you want to move just £10,000 of it to a new provider, you will be able to, regardless of when that £15,000 was paid in.
The ISA allowance is still set at £20,000, though. As per Money Saving Expert, for the 2024/25 tax year, the Government is freezing the annual amount you can save at: £20,000 for ISAs, £9,000 for JISAs and Child Trust Funds, and £4,000 (excluding the Government bonus on top) for LISAs.
You'll need to be 18 or over to open a cash ISA
At the moment, a 16-year-old can open an adult cash ISA. All adult ISAs will eventually need savings by the age of 18 (you can still save in a junior ISA until the age of 18).
This suggests that a 16 or 17-year-old might want to consider creating and funding a cash ISA before April while they still have the opportunity.
Fractional shares and long-term asset funds
Mr Hunt also announced that fractional shares would be permitted to be held in ISAs.
This may seem like outdated information to some investors because emerging platforms such as Moneybox and Freetrade now let customers invest in fractional shares of stocks and shares ISA.
However, HMRC said earlier this year that the current regulations prohibited investment in fractional shares through an ISA and that any tax savings would have to be refunded.
Meanwhile, the Chancellor announced that starting in April 2024, long-term asset funds (LTAFs) will be eligible to hold their money with an Innovative Finance ISA.
The Financial Conduct Authority (FCA) declared earlier in the year that LTAF investors would be eligible for up to £85,000 in protection through the Financial Services Compensation Scheme (FSCS).
An LTAF is a fund comprising "illiquid" assets, including privately held businesses or real estate, which are more difficult to sell. The move is part of an effort to get regular investors to invest in private marketplaces.
