New Multiple ISA Rule: In the Spring Budget, the Chancellor announced new rules on how many cash ISAs and stocks and shares ISAs you can open within the same tax year.
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With the changes, savers who hold cash ISAs and stocks and shares ISAs can subscribe to multiples of the same type within a tax year – but there are restrictions.
Many major savings providers are not prepared for the reforms since the change is not mandatory.
The new rule is essentially up to your ISA provider. Previously, savers could only hold one new ISA of the same type.
In the midst of other ISA changes this tax year, this one could prove beneficial for thousands of cash ISA holders, as it means savers can keep up with bagging competitive rates just like traditional savings accounts without transferring funds, which makes transferring funds easier. The investors can then shop around for the best investment platform for their stocks and shares ISAs.
In this article, we look at how the new ISA rule works, and which banks and ISA providers have welcomed it.
Also Read: Capital Gains Tax: Key Insights and Rates for 2024
In this tax year, what changes have been made to Isas?
There’s no limit to the number of Individual Savings Accounts you can open this tax year. This was one of the biggest changes to the rules that went into effect on 6 April.
If you invested £10,000 in an easy access cash Isa last tax year, you couldn’t use your remaining balance in a fixed-rate cash Isa. Instead, you’d have to use it in a stocks and shares Isa or lifetime Isa.
You can now invest in as many Isas as you like this tax year since this rule has been abolished.
You can also now transfer funds from one provider to another in a partial manner. Before, you could only transfer certain funds. The entire contribution you made to that cash Isa that year had to be transferred over if you wanted to move your money from your cash Isa to a stocks and shares alternative.
You can now determine the amount that you wish to transfer. However, provider rules may apply. Please check the terms and conditions before opening an account.
Also Read: Tax Refund Delayed? It Could Take Years – What You Need to Know
What are ISAS and how do they work?
Isas are tax-efficient ways to invest or save money. Dividends, profits, and interest you earn are exempt from capital gains and income taxes.
It allows you to make the most from your savings and investments. However, there are limits on how much you can deposit into your Isas every tax year, which runs from April 6 to April 5, rather than January to December.
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What is the maximum deposit amount?
This tax year, you can deposit up to £20,000 across your chosen Isas. The £20,000 limit is known as your Isa allowance, and you must use it before the end of the tax year before it is renewed. You cannot carry over some of your allowance into the next year if you still have some.
Certain types of Isas, however, are exempt:
- You can save up to £4,000 a year into a lifetime Isa
- A junior Isa allows you to save up to £9,000 per year (although this is for your child and does not affect your own allowance of £20,000).
- There is a pooling of allowances across Isa types, so if you contribute £4,000 to a lifetime Isa, you will have £16,000 to invest in other Isas.
What is the best time to open an ISA?
Investing in a stock and shares ISA on the first day of the tax year will yield a higher return than investing on the last day.
Right now is a good time to open a cash ISA, as interest rates will drop this spring, pushing down savings rates.
Plum offers the most flexibility, followed by Moneybox and Shawbrook Bank’s one-year fixed ISA, with a minimum deposit of $5,000.
A fixed ISA will offer a better return than an easy-access cash ISA at the moment.
Also Read: EV Tax Credit 2024: Everything You Need to Know, How to Qualify, Is There Any New Rules?
