Get set for an ISA shake-up – with more opportunities to save money
Edited by Amy Burns Changes coming into force in April will make it easier to pay into multiple accounts. So how can you make sure you are maximising your returns? By
ISAs will become more flexible from 6 April, meaning you will be able to pay into more than one of each ISA type per tax year. The two main types of ISA are cash and investment. Currently, you can only pay into one cash ISA or one stocks and shares ISA across a tax year. But from next month, you can pay into multiple ISAs – although you’ll still be bound by the £20,000 overall limit.
The changes mean you will be able to switch providers or accounts more frequently, taking advantage of better interest rates or deals as they come up.
If you save into a cash ISA, it means you can open another account offering a higher interest rate and pay into that instead. Under the current rules, you have to close an account and transfer all your savings to the new account if it’s in the same tax year. You can also opt for both easy-access and fixed-rate ISAs more easily.
“This is a really sensible way to inject much-needed flexibility and simplicity into the system,” says Sarah Coles, a personal finance analyst at savings and investment provider Hargreaves Lansdown.
“For cash ISA savers, it offers the opportunity to jump on more competitive deals with the rest of your ISA allowance.
More flexible finance
For those that save into a stocks and shares ISA (also known as an investment ISA), you are also no longer restricted to one provider per tax year.
So you could pay into at least two investment ISAs over the course of the year – you may want to do this if you want a wider range of investments that isn’t offered by one provider.
Funmi Olufunwa, who describes herself as a keen saver, is pleased with the new flexibility rules coming in next month. Funmi, from London, is in her 40s and lives with her partner and five-yearold daughter. She is currently saving in a cash ISA to pay for home renovations. “We moved house during the Covid-19 pandemic and set aside money for renovations, but costs have been going up since then and we haven’t got round to starting the work yet,” she said.
“The money is sitting in a cash ISA, because I don’t want to risk investing it. We’re hoping to do it in the next year or so,” adds Funmi, a consumer finance lawyer who also runs financial education workshops through her company Hoop Finance.
Funmi’s cash ISA currently pays interest of 4.95 per cent, fixed until December 2024. She has switched ISAs several times and likes to secure the highest interest rate possible, so is pleased she could potentially pay into multiple ISAs from next month.
“It’s good these changes are coming in because I think there are some people who are maybe a bit reluctant to commit to one type of ISA. From April, you can take comfort from the fact you could pay into another one if you change your mind or a better deal comes along.”
The changes will also make it easier to transfer money between ISAs during a single tax year.
Currently, you have to transfer all of the money. But from next month, you can transfer part of an ISA to another provider. It means you can still retain money in an existing account, and transfer some of the balance to another. Be aware though that not all ISA products allow transfers in, so check with your chosen provider first.
Shopping around for deals
Tobias Gruber, founder of website My Community Finance, says that to make the most of the upcoming ISA changes, savers should proactively explore different savings options to find the best deals.
“Shopping around for competitive interest rates and exploring various savings options can maximise the benefits of your ISA limit. Informed choices about where to invest your savings can make a substantial difference in your long-term financial stability,” he says.
You could pay into another one if a better deal comes along