All You Need to Know About ISAs

In the 2023 Autumn Statement, the Government announced a package of ISA reforms, most of which came into effect from 6 April 2024. In this article, we take a look at what these reforms involve – useful reading for those preparing for the CII’s R01, R02, R03, R06, AF1, AF4, or AF5 exams.

This article is correct as at 30 July 2024 and is relevant to the 2024/25 examinable tax year.

Cash ISAs

The minimum age for a cash ISA has been raised to 18 (from 16).

Before April 2024, 16- and 17-year-olds could subscribe to a cash ISA. Since April 6, 2024, no one aged 17 or younger can subscribe to more than one cash ISA. Transitional arrangements, ending on April 5 2026, include:

• If a 16- or 17-year-old does not have a cash ISA as of April 5, 2024, they can apply for and subscribe to one cash ISA per tax year until they turn 18.
• If a 16- or 17-year-old already has a cash ISA, they can continue to subscribe to it or transfer it to another cash ISA after April 6, 2024.
• ISA managers have discretion to offer cash ISAs to individuals under these transitional arrangements.

This reform was made to make Cash ISAs consistent with the existing age requirements for Stocks and Shares, Innovative Finance and Lifetime ISAs. 

Multiple ISAs

Since 6 April 2024, savers have been permitted to open and pay into multiple ISAs (compared to just one per type per tax year in previous tax years). All subscriptions must still remain within the overall ISA subscription limit of £20,000.

The new rule does not apply to Lifetime ISAs or Junior ISAs and is discretionary (meaning ISA managers can choose to limit subscriptions to only one ISA of each type held with them in any tax year.)

This change means that investors can now spread their subscription across as many different providers as they see fit, better enabling them to take advantage of new product opportunities (e.g., higher rates or lower fees) as and when they become available.

ISA Transfers

Partial transfers are now permitted for current year subscriptions, subject to the discretion of the provider. Previously, the whole amount of any current year subscriptions had to be transferred. This is still the case for Lifetime and Junior ISAs.

This gives investors more flexibility in terms of transferring just some of their current year subscription, without having to transfer the full amount already invested, if they so wish. This could also be useful where an investor breaches the £85,000 FSCS threshold.

Existing ISAs, New Tax Year

There is no longer a requirement for an investor to make a new ISA application where an existing ISA account has received no subscription in the previous year.

So, potentially less admin here for an ISA investor, although again the change is not mandatory for ISA managers.

Innovative Finance ISAs

To improve their attractiveness to investors, long-term asset funds, open-ended property funds with extended notice periods, and cash have been added to the list of qualifying investments in an innovative finance ISA.

Funds that would otherwise qualify for a stocks and shares ISA but cannot be liquidated within 30 days, are now eligible to be held in an innovative finance ISA. However, the fund must be able to be liquidated within 31 to 185 days of the investor’s request.

UK ISA (British ISA)

Finally, a consultation has taken place on the introduction of the UK ISA, often referred to as the British ISA. Although the outcomes of the consultation have not been published as yet, this new ISA (once live) will offer an additional £5,000 allowance on top of the current ISA allowance, providing a new tax-free investment opportunity in the UK.

This new ISA is part of the government’s plan to encourage more saving and investing across the country, give businesses more access to money, and make the UK stock market more appealing.

Grab the resources you need!

If you’re studying for your CII R01 exam, and you nervous at the thought of exam day, grab our free taster to try out one of Brand Financial Training’s resources for yourself.  Click the link to download the R01 mock paper taster now!

Alternatively, you can download the taster for AF1, AF4, AF5, R02, R03, or R06 if one of those exams is on your horizon.