There is a trend – new financial year brings new people who ask the same question. Everyone interested in investing and personal finance is asking – what is the ISA allowance for 2023/24?
I have previously covered the topic of ISAs. I find these accounts extremely beneficial and useful. You can invest and take all the profits out tax free for life. The beauty of these – there is no time restriction on when you can access this money.
Below I will cover the key points around ISAs, different types available, the allowance each of us has as well as what am I personally doing to maximise the benefit from these.
what is the ISA allowance for 2023/24?
ISA allowance for 2023/24 stays the same as it was for the past 6 years – £20,000. This in my view is an extremely generous amount for public to benefit from. Remember, all the dividends and capital appreciation here remains tax free for life.
The financial year in the UK starts on the 6th of April every year. This is when you can add £20k more into your investment pot. If you didn’t reach the £20k limit – your balance will be reset anyways.
can I deposit into different ISAs in the same year?
There are a number of different types of ISAs you can invest into. On top of that – you don’t have to limit yourself to only one ISA.
The main criteria for using ISAs are:
- invest only up to £20,000 per year
- deposit only into one of the same type of ISA per year
You can split your annual allowance between many different types of ISAs. The types of ISAs available for you to use are:
- Cash ISA
- Stocks & Shares ISA
- Lifetime ISA
- Innovative Finance ISA
You can split your £20k annual allowance between these in any way you wish. Key thing to remember – you can’t top up multiple ISAs of the same type in the same year. What this means – if you have a Barclays Cash ISA and HL Cash ISA, you can only add money to one of these in the same financial year.
For those wishing to add more than £20k per year – there is a Junior ISA you can open for your kids. This gives you additional £9,000 to save each year.
do I get £20,000 allowance per ISA?
There is theoretically no limit to how many ISAs you can have. Unfortunately, this won’t give you more annual allowance than anyone else has.
The maximum limit you have per year will remain at £20,000. You are however free to choose how you wish to allocate this money.
You can split your annual allowance into any fractions that work for you. The only limitation you have is on your Lifetime ISA. Maximum you can use here is £4,000 per year out of your £20,000 total. The amazing thing about LISA – you get 25% extra given by the government on top of whatever you have invest into LISA in that financial year.
can I carry my allowance to the next financial year?
There is unfortunately no way to carry over the ISA allowance balance that you are left with to the following financial year.
Each year you have up to 5th of April to use as much of the £20,000 allowance you have. Any balance that is left – is gone.
This is why planning on how to use your allowance in advance is critical. Plan if you can add a massive lump sum at the begging or at the end of the year? Or is potentially monthly direct debit is an option that might work the best for you.
can I add to my existing ISA or transfer it to a different provider?
Adding to your current ISA is not the only option you have. You can also always choose to transfer your existing ISA to a different provider in case you find a better product.
If you decide to transfer your ISA there are two options that might apply to you.
Firstly, if the money you want to transfer is in an ISA you opened this year. In this case you will need to transfer the whole balance of the ISA to the new provider of your choice. This can also be an existing account you previously opened.
In case the ISA you want to transfer money from has money from prior years – you can choose how much of the balance on there you wish to move. This can be either the whole amount or just a part of the balance available to you.
Transferring money is a relatively simple process. You will simply need to fill in a form and the rest is done for you.
One watch out at this stage – make sure there are no fees you need to pay. Or at least, make sure you are familiar with these so there are no nasty surprises at the end of the process.
how to start using your ISA allowance?
This is the step that makes most people really worried or concerned. The whole process seems like a wizardry to many. In reality – things are way simpler that one might think.
The first step in the process is fairly simple – choose a platform that gives you an option to open ISA. There are few things I would do at this stage:
- Make sure the institution you choose to open your ISA with is FSCS protected. In case they go bankrupt – you can get up to £85,000 back
- Compare the fees. Make sure the platform charges reasonable fees. There is no point paying over the top fees when you are not using most of the features provided
- Ideally you want a platform with a wide range of options to invest into. This however is more advanced step
Once you choose a platform – open your account. They will ask for some basic personal questions. This should be easy to set up.
Once the account is set up – deposit your funds and invest into the asset type that works the best for you.
what’s my personal plan?
I have used the same plan for many years now. This year will be no different.
I always try to invest the same amount every single month. This way I get to benefit from when markets fall. But also I see the growth coming in over time.
One thing I will do different this year – I will open a new Stocks & Shares ISA with a new provider. This will be the case to make sure I can benefit from FSCS protection. I try to keep all my accounts below £85k.
The odds of one of these going bust are low but this way I reduce risks even further.
My plan is always the same – invest in the long game. This isn’t the get rich quick scheme.
The types of investments I personally make are index funds and solid performing dividend stocks when I can get these at a slightly discounted price.
summary
ISAs are a great tool for those looking to invest in a tax efficient way. The best part about these – there are no age restriction as to when you can access your money.
The ISA allowance for 2023/24 stands at the same level as it did for the past 6 years – £20,000 per person. This should be more than enough for anyone looking to benefit from tax advantaged accounts.
There are many different types of accounts to choose from however this would be a call you should make on your own. Different types of ISAs work particularly well in different circumstances.
When investing – look for long term strategies rather than jump on a hyped up opportunity. This in most instances will make a lot more financial sense that trying to follow the crowd and losing all.