The start of the new tax year on 6 April will usher in some important changes for individual savings accounts (ISAs). 

These include new rules around how many ISAs you can pay into each year and cuts to tax allowances for those who invest outside ISAs.

Below, we look at the changes and what they might mean for you.  

1. You can open multiple ISAs of the same type in the same tax year

As of 6 April, investors are allowed to open and pay into multiple ISAs of the same type in the same tax year (except for lifetime ISAs). This means you could contribute to two or more stocks and shares ISAs and/or two or more cash ISAs. Previously, it was a case of one ISA of each type, each tax year¹.

While this brings more flexibility, it’s important to make sure you don’t exceed your annual ISA allowance, which remains at £20,000 for the 2024-25 tax year. The allowance applies across all your ISAs, so if you pay into multiple ISAs you’ll need to keep track of your contributions.

Bear in mind that having several ISAs may make it harder to manage your investments and understand whether you’re on track to achieve your goals. You could also pay higher fees to one ISA provider versus another. Fees can eat into your long-term investment returns, so you may wish to check what you’re paying before parting with your hard-earned money.

2. You’re allowed to make ‘partial’ transfers in the same tax year

Another change for 2024-25 is that investors can transfer part of their ISA funds from one provider to another, no matter when the money was paid in. Previously, if you contributed to an ISA and then wanted to transfer the funds to a different provider during the same tax year, you’d have to transfer all of that year’s contributions. 

At the moment, Vanguard isn’t able to accept partial transfers in the same tax year, but we can still accept full transfers. 

3. Tax-free allowances have become less generous

The final changes – cuts to tax allowances – don’t apply to ISAs directly, but make ISAs an even more important way of reducing your overall tax burden.

When you invest through an ISA, your money can grow free from the income tax you might pay on the dividends² or interest you receive, as well as the capital gains tax (CGT) that could be applied on any profits (‘gains’) you make when selling assets. 

When you invest outside an ISA, you can use certain tax-free allowances, but these have become less generous in the 2024-25 tax year. The amount of tax-free gains you can make has been halved to £3,000 and the amount of tax-free dividends you can earn has been halved to £500. Much like fees, taxes can eat into your overall investment returns, which is why it could make even more sense to shelter your money in an ISA in the 2024-25 tax year.

¹ These rules do not apply to junior ISAs. A child can only have one cash junior ISA and one stocks and shares junior ISA at any one time. The annual allowance for junior ISAs is currently £9,000. These rules also do not apply to lifetime ISAs.

² Dividends are the payments some companies make to their shareholders out of their profits.