Smart ways to make the most of new Isa rules
The new tax year started on 6 April, bringing with it opportunities to get better value out of your Isas.
Isas are among the most useful tools savers and investors have.
They allow you to earn interest, dividends and capital gains tax-free – which translates into better returns over the long-term – and they could also cut paperwork and dealing with HMRC.
Currently, you can only open and pay into one Isa of each type per year, eg one stocks and shares Isa, but this rule will soon be scrapped.
Our analysis of stocks and shares Isa fees shows big differences between providers.
Here, we lists five ways to make the most of the new rules.
- Find out more: Best investment platforms in the UK 2024
Please note: the content contained in this article is for information purposes only and does not constitute financial or investment advice.
How Isas are changing
From this April, you're now able to both open and pay into more than one of the same type of Isa each year.
This means you could open two stocks and shares Isas with two different providers in the 2024-25 tax year. You’ll still have the same £20,000 allowance to spread between these and any other accounts.
As well as opening new Isas, you’re also now able to transfer some of the investments in your Isa to another provider, while still being allowed to keep part of your portfolio on the same platform.
During the previous tax year, you'd need to either sell the investments you mean to move and buy them on the new platform – and using up your Isa allowance in the process – or transfer the whole pot.
1. Try out a cheaper Isa provider
Hesitations around the difficulty of stocks and shares Isa transfers can hold investors back from accessing other providers who might offer lower fees and better customer service.
But, with more options for trying out new platforms, you can save huge amounts in fees by investing with the cheaper providers.
If you had £25,000 invested in funds, you’d save £75 a year by investing it in the cheapest platform for this portfolio size, Vanguard, instead of the most expensive, Hargreaves Lansdown. For the same amount in shares, you save £66 by opting for Freetrade over Fidelity.
For £250,000 invested in funds, you’d save £1,013 by switching from Hargreaves Lansdown to Halifax Share Dealing. Or, in shares, save £1,077 by swapping from Moneybox to Freetrade.
- Find out more: Best stocks and shares Isas 2024
2. Branch out into new investments
While important, your choice of investment platform shouldn't just be about fees.
Being able to try out a new Isa provider means you can experiment with investments not offered by your current provider.
If your current provider only offers funds, but you want to explore shares or investment trusts, you can open another Isa with a provider that offers these.
Consider investing a small proportion of money to begin with, to understand how the new investments perform and later decide if you want to change your investing strategy.
- Find out more: our investment platform reviews detail what sort of investments each provider offers
3. Hold shares in one Isa and funds in another
Even when providers offer a wide variety of investments, their fee structures might mean they're good value for some, but very pricey for others.
Aviva, for instance, is among the cheapest platforms for investors with big portfolios of shares, due to an annual cap on costs. But for those with big portfolios of funds, where costs aren't capped, it's among the more expensive providers.
Those investors could switch their fund holdings to providers with the lowest fees for large fund holdings, which we found to be Halifax Share Dealing, Interactive Investor and Vanguard.
An increasing number of investment platforms – such as Freetrade and Plum – charge no transaction fees when you buy and sell shares, so they could prove ideal if you trade frequently.
Our fees comparison tables include tables for funds and shares, ETFs and trusts.
4. Move uninvested cash into a cash Isa
Interest rates on uninvested cash in stocks and shares Isas is often terrible.
Worse still, you may be charged fees on that cash, in a practice the Financial Conduct Authority has described as 'double dipping'.
Out of 3,127 investors surveyed in January 2024, we found that 48% of them didn't know what interest rate they were getting on their uninvested cash.
Don't put up with it: if you have cash you're keeping out of the market for more than a month or two, open a new cash Isa and transfer it across.
If you know how long you plan to wait, you could even open a fixed-rate cash Isa to benefit from higher rates.
- Find out more: Best cash Isas 2024
5. Keep your investments protected
Being invested across several platforms could also offer better protection for your money if you have a particularly large investment portfolio.
This is because the Financial Services Compensation Scheme (FSCS) covers £85,000 per platform, if the platform goes out of business.
Spreading a large portfolio over several Isas, with no more than £85,000 in each, would ensure all of your investments are fully protected.
Platforms should also have customers' money 'ring-fenced', so it's protected in the event they go bust, but FSCS protection provides an extra layer of reassurance.
What about the British Isa?
The announcement of a new £5,000 British Isa allowance in the Chancellor's Budget made headlines.
But we've decided not to include it here, because it's unlikely to be launched during the 2024-25 tax year, so won't impact how you use your Isa.
Find out more: The British Isa: does it pay to be patriotic with your savings?
What are the best stocks and shares Isas?
Our reviews of stocks and shares Isas and general investment accounts have just been updated for 2024, so you can find the best investment platforms in the UK.
We surveyed 4,136 customers and analysed fees to put together in-depth reviews of 18 investment platforms, with two named as Which? Recommended Providers.
Investments are not 'one-size fits all', because we all have our own budgets and goals. Our reviews can help you find the right platform to achieve them.
