New ISA allowance rules: What savers need to know

The March Budget announcement brought a range of alterations to how savers can invest in ISAs.

These changes were complicated and require good professional advice to make the most of. Read our helpful Q&A which explains the major changes.

Q: Is it possible to use the whole £15,000 of this year’s ISA allowance for stocks and shares ISAs and move some of the old cash ISA into an existing stocks and shares ISA?

A: Absolutely. The £15,000 allowance relates exclusively to new deposits made in the current tax year. In other words, it’s permissible to transfer whatever money you want, as frequently as to want, from old ISAs without using up the current tax years ISA allowance. The only proviso is that the provider must accept the incoming transfers.

Q: What are the rules regarding the payment of new money into stock and shares, and cash ISAs?

A: You are only allowed to pay new money into one stocks and shares ISA and one cash ISA once a year. A previous year’s savings can be transferred at any time to any account, regardless of whether it is new or old. This means that – provided the £15,000 is divided between no more than one account of each kind – you can do whatever you wish with old ISA money.

Q: Are there any other considerations I should take into account?

A: Keep in mind that you will probably have to transfer the entire account. This is because ISA providers rarely allow partial transfers.

Q: Isn’t this all a bit unclear?

A: It certainly is. After the March Budget announcement of alterations to the system, there has been considerable confusion over the new ISA rules. The chancellor’s intention was to simplify the rules, but the feedback we have received suggests the opposite.

Q: How do the numbers add up?

A: The ISA allowance for the present tax year increased to £15,000 on July 1 – up from £11,880. The principal change is designed to enable savers to place the whole allowance into a stocks and shares ISA, or a cash ISA. This will remove the lower limit imposed on cash before July 1.

Q: Anything else savers should be aware of?

A: If at all possible, you should use your full ISA allowance before the end of the tax year. This is because the rules do not allow you to carry forward any unused allowance.

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