The difference between an ISA and other savings accounts, is that any interest earned on your savings is tax-free – but there are big ISA changes coming from April 6
There are big changes to ISAs kicking in from today (April 6) to coincide with the start of the new tax year.
ISA stands for Individual Savings Account. The difference between an ISA and other savings accounts, is that any interest earned on your savings is tax-free. However, you can only deposit up to £20,000 each tax year – although there are some accounts where the limit is smaller than this.
For example, you can only save £4,000 each tax year in a Lifetime ISA, or if you’re saving into a Junior ISA for your child, the limit is £9,000 each tax year. However, any money you save into a Junior ISA does not affect your own £20,000 allowance. Under current rules, you can only pay into one ISA of each type per tax year – but from April 6, you will be able to pay into multiple ISAs.
“This will be useful for investors who want to use more than one provider or have different ISAs for different financial goals,” said Alice Haine, Personal Finance Analyst at Bestinvest by Evelyn Partners. As well as this, you will also be able to do partial transfers of ISA funds no matter when you paid the money in – although you still won’t be able to pay in more than your annual ISA allowance.
Currently the entire subscription must be transferred. Anaam Raza of investment platform Saxo said: “You are still limited to £20,000 over all the subscriptions, but this added flexibility allows you to tailor your ISA to your specific needs. Adding to the flexibility to the allowance of partial transfers, so if you find that better deal, you don’t have to transfer everything from your old ISA to the new one, you can transfer as much or as little as you like.“
The age for when you can open a Cash ISA is also changing. At the moment, you can open a Cash ISA when you turn 16, but this will to 18 from April 6. If you’re opening a savings account, be sure to shop around for the best rates. You can get up to 5.17% easy access with a cash ISA, or up to 5.05% fixed.
