Understanding the new ISA rules for 2024

It’s possible to invest in specific companies by buying whole shares, but you can also buy smaller portions of a share.  With some single shares from companies costing £100s or even £1000s - if you want to invest in these companies but spend smaller amounts, you have the option to buy a portion of a single share. This is called a “fractional share”.   

You can’t buy fractional shares on the open market. Instead, you need to invest via an investment platform. New rules from HMRC that came into force on 4 November 2024 mean that any fractional shares you have already bought or may buy in the future under the ISA wrapper will be tax free. 

One feature of buying fractional shares is that only way to change providers is to sell and use the money to invest on another platform. Any gains will be free from capital gains tax –CGT– as it will be coming from an ISA. You can find out more about how to invest in stocks and shares ISAs in our guide. 

There are different types of ISA, including:

• cash ISA – that pays interest, and

• stocks and shares ISA – a type of investment.   

• Innovative finance ISAOpens in a new window - these include more long-term, less liquid investments such as peer-to-peer loans, alternative finance arrangements and cash.

Before April 2024, you couldn’t open two ISAs of the same type in the same tax year. You needed to close one to open another, for example to get a better interest rate.  

But now you can open and pay into as many ISAs of the same type as you like, as long as you don’t pay in more than the total ISA limit of £20,000 a year. 
 
This means you could open a cash ISA with one provider and then another elsewhere – helpful if you want to find the best interest rate or spread your cash to keep it safe. 

You don’t pay tax on interest on:

• cash in an ISA income, or
• capital gains from investments in an ISA.

If you complete a tax return, you don’t need to declare any ISA interest, income or capital gains on it.

A lifetime ISA or LISA is a type of ISA where the government gives you a bonus of 25%. While you can save a total of £20k per year in any ISA account or combination of ISA products you can only pay into one Lifetime ISA in a tax year and the maximum you can pay in is £4,000 (which will leave you free to save or invest £16k in any other ISA product that financial year). See our guidance on Lifetime ISAs for more information. 

Learn more about the different types of ISAs in our guide to ISAs and other tax-efficient ways to save or invest.

The new rules mean you'll be able to transfer a partial amount from one ISA provider to another, no matter when the money was paid in. Before the change you had to transfer your entire ISA of that type from the current tax year or nothing at all. You will also be able to keep any remaining funds with your existing provider and retain that account. If you want to change providers, we outline all the rules in our guide Cash ISA transfers – the rules.

The minimum opening age for adult cash ISAs is now 18 years old. This change will bring the product in line with the minimum age requirement for other types of adult ISA.

Don’t worry, if you're aged between 16 and 17, as you can continue to open and save into a Junior ISA. The downside is that the annual tax-free allowance is £9,000 – less than half the adult ISA allowance of £20,000. 

There is no minimum age limit to open a Junior ISA and when you turn 18 the account will automatically roll over into an adult ISA. If you’re thinking about opening a Junior ISA, we outline how they work in our Junior ISA guide. 

You can save up to £20,000 every year into adult ISAs without it being subject to income or capital gains tax. This is called a “tax-free allowance”. The annual tax-free allowance for an adult ISA is £20,000. This limit has been confirmed to be frozen until 2030.

If you’re looking for a longer-term investment, a stocks and shares ISA might be something worth considering. We take you through the key points in our Stocks and Shares ISAs guide, but the key point to remember is that there is no guaranteed return on any funds invested.

If you’re new to investing and want to know more about what it means, see our guide Thinking about investing? Make sure you understand the risks.