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ISA reforms loosen restrictions - February 5th 2024

ISAs will be more user friendly from April 2024 following a range of reforms. Although the changes could have gone further, significantly, multiple subscriptions to ISAs of the same type will now be possible during each tax year.

Multiple subscriptions

Currently, it is only possible to pay into just one ISA of each type per tax year. Multiple subscriptions will mean:

  • Cash savers will be able to open a new cash ISA if a better deal becomes available. With more flexibility, some funds could go into a fixed-rate deal, with a reserve held in an easy-access cash ISA.
  • Investors will be able to spread their investments over several different providers. For example, one stocks and shares ISA might be used for longer-term investments, with another – offering low dealing costs – used where regular trades are made.

Unfortunately, the annual £20,000 ISA contribution limit will not see any change, with the £9,000 junior ISA and £4,000 lifetime ISA limits also frozen.

Other changes

Although the detail is yet to be announced, the government’s intention is that in future it will be possible to hold fractional share contracts within a stocks and shares ISA. Existing rules mean that any holding must consist of at least one full share, even though the shares of some US tech companies – such as Apple and Microsoft – can cost £100s. The availability of fractional shares will particularly help regular savers.

Other changes to be introduced from April 2024 include:

  • It will be possible to make partial transfers between ISA providers during the tax year. For example, if £10,000 has been paid into a cash ISA since 6 April, £4,000 could be moved to a different provider. Under current rules, the whole £10,000 would have to be moved. Some ISA providers might, however, decide it’s too complicated to offer this facility.
  • The minimum account-opening age for cash ISAs is to be harmonised at 18. It will therefore no longer be possible for 16- and 17-year-olds to open a cash ISA – just a junior cash ISA where the investment limit is somewhat lower.

Any 16- and 17-year-olds without a cash ISA might want to open one while they still can – by 5 April 2024 at the latest.

The range of investments permitted within an innovative finance ISA is to be expanded, although the newly permitted investments are unlikely to be suitable for most investors.