How ISAs have changed this year

We’re in a new tax year now, and usually that’s when a few changes are made to our savings and investments by the Government. Some of them are trickier techy things to get our heads around and some are very simple. But if you want to make sure you’re maximising your ISA you need to be aware of the changes. We’ll break them down for you, without the jargon.

No change to allowances 

The first thing to note is that the amount we can all pay into our ISAs hasn’t changed. It’s still a limit of £20,000 per person, per tax year into all ISA accounts. So you need to add together what you pay into your cash ISA, investment ISA, Lifetime ISA, Help to Buy ISA or Innovative Finance ISAs and make sure it isn’t more than £20,000.  

The Lifetime ISA limit has stayed at £4,000 – but remember that this counts towards your overall limit of £20,000. So if you pay £4,000 into a Lifetime ISA you’ll have £16,000 left for all your other ISAs. And the limit on children’s accounts hasn’t changed, so you can pay in up to £9,000 per child into a Junior ISA account in their name – whether that’s cash or investment.  

You can now pay into more of one ISA of each type 

Previously there was a pretty confusing rule that meant you couldn’t pay into more than one of each type of ISA in a tax year. That means you couldn’t pay into two cash ISAs in a year, or two stocks and shares ISAs. But you could pay into one cash ISA and one stocks and shares ISA in each year. It was a confusing rule that lots of people didn’t understand.  

Luckily that rule has now been scrapped, so you can pay into as many of each type of ISA as you like each year. For example, you could open two cash ISAs and three investment ISAs in the same tax year (although that would be a lot of accounts to keep track of).  

This is particularly handy in the cash ISA market, as it means you can take out a cash ISA that has a good rate, but if the rate drops later in the year or a better one comes along, you can open that second account too. Likewise you could open one easy-access Cash ISA and one fixed-term cash ISA in a year. Previously you were pretty wedded to the first cash ISA account that you picked.  

But it means you’ve got to do a very good job of keeping track of how much you’re paying into these ISAs to make sure you’re not breaching the £20,000 limit we mentioned at the start. Also, you can still only have one Lifetime ISA each year, so don’t go opening more than one of those.   

Transferring ISAs has become easier 

The Government has got rid of another tricky rule, which previously meant that if you’d paid money into an ISA in the current tax year and then wanted to move to another provider you’d have to move the entire pot of money over. Now you can just move part of it – called making a partial transfer.  

For example, if you’d paid in £5,000 into an ISA in a tax year and then wanted to move it to another ISA previously you would have had to transfer the entire £5,000 to the new ISA (or more if it had increased in value). Now you could just move £2,000 if you wanted, and leave the rest where it is.  

No more re-applying for your own ISA 

If you opened an ISA and then didn’t pay into it for a year or more it would be classed as a “dormant” account. That means that if you wanted to pay into it in a future year you might be asked to reapply for the account. Most of the time this would involve filling in an “renewal form” and you wouldn’t be able to pay more money in until you’d completed this admin. They’ve now scrapped this, which is a big help for people who don’t always pay into their ISA every year. We’ll all for saving on admin! 

Read more about Dodl ISAs