The deadline for completing self-assessment has been and gone and that usually means focus turns to the end of the tax year. From a planning perspective, that is likely to involve using any unused allowances and devising a strategy for when they reset on 6 April.
Whilst the ISA and Junior ISA subscription limits are both unchanged and frozen at their current levels until 2030, there have been some “tweaks around the edges” over the past 12 months that are worth noting when prepping for clients that have prioritised saving and investing in 2025.
New account applications
From 6 April 2025, all new ISA applications must contain the investor’s National Insurance Number unless the investor is not eligible to have one. This is a tightening of the current rules that allow an ISA manager to accept a declaration from the applicant that one did not exist.
It will be important for those planning to open an account and subscribe to ensure this information is close to hand or has been applied for in good time to avoid delays as ISA managers won’t have the flexibility they do currently.
It is not all bad news, however. The requirement to reapply (to the account manager) for an ISA before paying in for the first time in a tax year following one where no subscription was made, by signing a fresh declaration or even completing a fresh application form, has now fallen away. This will hopefully reduce some admin for those savers and investors who have spread their savings across a few platforms but like to keep their subscriptions together despite the rules now offering extra flexibility.
There was also a welcome development for those who prefer to spread their savings across a few banks or platforms. This is now possible after the “one ISA of each type per tax year” rule was removed as part of the package of measures aimed at simplifying this popular savings product.
Partial transfers of current year subscriptions – At the beginning of the current tax year (2024/25), the requirement for investors to keep their current year account intact was relaxed and replaced with the ability to move funds freely between accounts. This represented a win for investors but the rules needed some fine tuning to make the transfers easier to administer between ISA managers. Going forwards, the transferring manager will need to clearly note on the transfer history form when a transfer does not include all funds subscribed to them during that tax year. This will help the receiving manager record the amount of remaining allowance and reduce the potential for double reporting.
This could be particularly useful for clients who have paid £20,000 into their ISAs without realising they could've put £4,000 into a Lifetime ISA. They can now flip £4,000 from the former to the latter and take advantage of the 20% bonus.
ISA qualifying investments
From 4 November 2024 ISA managers have been given the ability to offer fractional interests within stocks and shares ISAs, Junior ISAs and Lifetime ISAs where eligible, with CTF providers given the opportunity to reciprocate. Broadly the same investment criteria apply to fractional units that apply to other qualifying investments; however, the interests won’t carry any voting rights unless the investor holds a whole unit. It remains to be seen how widely this will be offered across ISA providers, with many choosing not to allow access at present.
Looking ahead
HMRC continues to work on the ISA digitalisation project, and is using feedback to shape the reporting landscape of the future, with the goal of reducing the time and resources required to identify invalid accounts that have lost their tax-free status.
It’s also worth monitoring whether the fund managers of any overseas funds you use decide to register their funds under the Overseas Funds Regime (OFR). This is the permanent solution to the temporary passporting regime following Brexit, and while it should be a streamlined process it’s possible that not all fund managers register, which could lead to some funds ceasing to be eligible for ISAs.
Those who liked the idea of the British ISA may be disappointed however, with the Government not taking initial plans for the product forward following feedback received during consultation.
So, with self-assessment done and tax year end looming, you now have everything you need to navigate the world of ISAs for another year.
