Despite the previous government’s 2024 Spring Budget proposing a new type of Individual Savings Account (ISA) that would extend the annual savings allowance for ISAs, this did not come to fruition in the Labour government’s 2024 Autumn Budget.
Instead, the current tax-free allowance for ISAs will be frozen for another 5 years after already remaining unchanged since April 2017 – staying at £20,000 until April 2030.
While it’s good news that this tax-free savings option won’t be scrapped, this long freeze is likely to result in fiscal drag if savings and interest aren’t managed appropriately.
Here’s a quick summary of how the frozen ISA limits could affect your savings.
ISA subscription limits
The £20,000 tax-free savings limit applies across all types of ISAs, including:
- Lifetime ISAs
- Cash ISAs
- Stocks and Shares ISAs
- Innovative Finance ISAs
Lifetime accounts specifically have a £4,000 annual tax-free limit, which is included in the total tax-free savings allowance and will also be frozen at this threshold until 2030.
Other types of savings accounts with a frozen annual allowance include Junior ISAs and Child Trust Funds (CTFs), which can accumulate £9,000 a year tax-free for the next 5 years.
A rumoured lifetime savings cap of £500,000 didn’t materialise, but neither did the previously mentioned UK ISA, which would have introduced an additional allowance of £5,000.
Fractional interests
Though HMRC previously stated that fractional interests (also known as fractional shares) could not be held within a Stocks and Shares ISA or CTF, the tax agency has confirmed this is actually possible under new regulations that came into effect in November 2024.
Fractional shares will be allowed under certain conditions, including being in a contractual arrangement. Regular savers can now acquire shares in international companies, but ISA managers must remove any fractional interests that aren’t eligible under the new rules.
Do you need ISA advice?
Currently, there are more than 4,000 savers in the UK with ISA saving pots worth over £1 million. Whether you’re one of them or you’re new to the world of ISAs and need help managing your savings, we can offer professional guidance here at gbac.
You can find HMRC’s basic ISA guide on the government website, but if you want in-depth advice on savings accounts or you’re looking for an ISA manager, you should get in touch with our team of knowledgeable accountants in Barnsley.
Just call us on 01226 298 298 to speak to the gbac team, or send your query by email to info@gbac.co.uk and one of our financial advisers will reach out as soon as possible.`