How ISA rules are changing in 2024/25

For 25 years, ISAs have been providing tax-efficient ways to save and invest your money.

With rules changing for 2024/25 in what Which? Consumer group are calling “the biggest shake-up to tax-free savings in 15 years”, we run through the key changes you should be aware of.  

Single ISA limit removed

Under the old rules, you could only contribute to one ISA of a specific type, such as a Cash ISA or Stocks and Shares ISA, in a single tax year. But under the new system, savers will be free to split their ISA allowance across multiple ISAs of the same type. As a result, you’ll have more flexibility to tailor your savings strategy to your specific needs and priorities and shop around for the best rates.

Simplified ISA management

If your ISA has laid dormant and unused for one tax year, you would have to go through the effort and inconvenience of getting in touch with your provider and open a new ISA. This rule is now being removed, so even if you haven’t contributed to an existing ISA, it will remain open, and you can carry on contributing in a subsequent tax year without having to fill in any forms.

Minimum age raised

The age at which a person can open an adult ISA is changing from 16 to 18. This brings it in line with adult stocks and shares ISAs. However, this means that while 16 to 17-year-olds can carry on saving in a Junior ISA, they’ll get a much lower annual tax-free allowance of just £9,000, compared with £20,000 for adult ISAs.

Expanded Innovative Finance ISA options

Long-Term Asset Funds (LTAFs) and other investment products with extended lock-in periods are now permissible within Innovative Finance ISAs. This opens up new options for investors who are looking for alternative investment opportunities with tax benefits.

What does this mean for you?

The changes to the ISA rules will give you much greater flexibility and choice over what you do with your money.  Having the freedom to put money in multiple ISAs of the same type means you can optimise your savings strategy to take advantage of the best interest rates. And if, for some reason, you haven’t contributed to an ISA in a particular tax year, you can resume where you left off without having to submit unnecessary applications. ISA rules are not set in stone so it’s always worth talking to your adviser before making any changes to ensure your financial goals stay on track.

And finally, during the Budget, Jeremy Hunt also revealed plans for a ‘British ISA’ designed to encourage Britons to invest in the UK Market. The British ISA will offer an allowance of £5,000 which will be in addition to the existing £20,000. Currently the new ISA is in a consultation period, and we await further details to confirm the type of assets that will be available within it.

Speak to your financial adviser if you have any questions about the best savings options or alternatively request a callback.