ISA customers have been warned they have just one month to cash in on a 'loophole' before it closes. The ISA "loophole" will close on April 5 when the rules change as a brand-new tax year begins across the country during the fourth month of the year.
The loophole enables certain savers to invest nearly £30,000 tax-free this fiscal year. Laith Khalaf, head of investment analysis at AJ Bell said: “There is currently a bit of a loophole in the rules, which means children between the ages of 16 and 18 can apply for a £9,000 Junior ISA and a £20,000 adult cash ISA at the same time.”
He said this would “provide them with a potential ISA contribution of £29,000 in total” before adding it would be “the biggest allowance anyone at any age receives”. However, Mr Khalaf noted: “This loophole is being closed from April 5 this year when the minimum age to open a Cash ISA will be raised from 16 to 18.”
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Mr Khalaf explained: “The child can start to manage the JISA from age 16 and gets access to it from age 18, so it can be used to help them through university, travel during a gap year, or go towards a house deposit. There are both cash and stocks and shares Junior ISAs available, with many parents opting for the cash option.”
Junior ISAs (JISAs) let you save or invest up to £9,000 in the 2023/24 tax year, with the cash locked away until the child turns 18. A junior ISA is a permanently tax-free savings or investment wrapper aimed at encouraging families to save for their children's futures.
Any money you put in one will be locked away until your child's 18th birthday, when it becomes their cash (and will become a standard ISA). You can put up to £9,000 into a junior ISA in the 2023/24 tax year, which ends on Friday 5 April 2024.
The £9,000 can be split whichever way you like between the two types of junior ISAs.
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FAQs
No, you can invest it whenever you like. Any money you add by 5 April will count as an ISA subscription for the current tax year, but you can invest it at a later date. Even if you invest this money in the new tax year, it won't affect your new £20,000 ISA allowance.
What is the ISA loophole? ›
Junior ISA Loophole
Before April 6, 2024, 16 and 17-year-olds could save up to £29,000 a year in ISAs by using both the Junior ISA and adult cash ISA allowances. But now, only those 18 and older can open cash ISAs. This means 16-year-olds can't access adult cash ISAs anymore, closing that loophole.
What are the changes to ISA from April 2024? ›
1.1 Increase the age for opening cash ISAs from 16 to 18 years old and over. From 6 April 2024 it will not be possible for anyone aged 17 and under to subscribe to more than one cash ISA . This is a mandatory change with transitional arrangements.
What does Martin Lewis say about ISAs? ›
"For most people with fixed rate cash ISAs, I can't promise everyone, but certainly enough of you very close to the end of it should be ditching them, paying the penalty, and putting them [the money] in somewhere that pays more at the moment."
Can you lose money on an ISA? ›
Your savings aren't protected from losses if you invest in a stocks & shares ISA. If you put money in a stocks & shares ISA, then invest it in funds, shares or bonds, then it's a 'risk-based investment', NOT savings. So, if the things you invest in don't do well, you could lose money - perhaps even all of it.
What are the new rules on ISAs? ›
You can open as many ISAs of the same type as you like
But you couldn't save into more than one ISA of the same type. Under the new rules, you can pay into multiple versions of the same type of ISA, up to your annual ISA allowance of £20,000 in each tax year.
Can you take all your money out of an ISA? ›
You can take your money out of an Individual Savings Account ( ISA ) at any time, without losing any tax benefits. Check the terms of your ISA to see if there are any rules or charges for making withdrawals. There are different rules for taking your money out of a Lifetime ISA.
What date can you start a new ISA? ›
At a glance: The ISA allowance for 2024/25 is £20,000, unchanged from the last tax year. This means you can pay £20,000 into ISAs from 6 of April 2024 to the 5 of April 2025.
What is the cut-off date for an ISA? ›
The deadline for using your ISA allowance is 5 April 2025. This is the end of the tax year, and after this date, you will no longer be able to use your allowance for 2024/25.
Can you open an ISA anytime? ›
Yes, you can.
ISAs are a magical tax beneficial scheme that we have in the UK, making saving and investing simpler and more effective than if you go without. Whilst it's never too late and there's no bad time, there's no better time than the present. The sooner that you start, the more your future self will thank you.
