The ISA allowance refers to the maximum amount you can invest into an individual savings account in a single tax year.
For the 2023/24 tax year the overall limit is £20,000 which is the same as the previous 22/23 tax year.
The annual ISA limit applies collectively to cash ISAs, stocks and shares ISAs, innovative finance ISAs (IFISAs) and lifetime ISAs (LISAs).
The government can change the ISA allowance each tax year which runs from the 6 April to the following 5 April so it’s best to check what you are allowed around April time each tax year.
What is the Maximum ISA Allowance for 2023/24 tax year?
The maximum total amount you can contribute across all types of individual savings accounts (ISAs) during the 2023/24 tax year is £20,000.
The ISA allowance rules allow you to spread your allowance over four types of ISA within the maximum ISA limit with a cap in place of £4k per tax year for lifetime ISA’s.
What are the 2023/2024 allowances for each ISA type?
Checking the available allowances against your ISA accounts is recommended to avoid mistakes.
The limits you can pay into each ISA type for the 23/24 tax year are:
- Cash ISA – £20,000 per tax year.
- Stocks and Shares ISA – £20,000 per tax year.
- Innovative Finance ISA – £20,000 per tax year.
- Junior ISAs – £9,000 per tax year. A junior ISA is specifically for saving for a child or grandchild and doesn’t effect your £20,000 ISA allowance.
- Lifetime ISA – Capped at £4,000 per tax year. You can’t pay into a lifetime allowance over the age of 50 and your first payment has to be made before you are aged 40.
What to do if you pay more than the allowance into an ISA
ISA providers will normally stop you from going over the £20,000 allowance.
The mistake can happen though especially if you have multiple ISA providers in which case you should call HMRC to tell them on 0300 200 3312.
When you get in touch you should have your national insurance number available and call between 8am to 6pm Monday to Friday.
What are the tax benefits of using the ISA Allowance?
The importance of using your ISA allowance lies in its tax benefits. By investing within an ISA you can grow your savings and investments without paying income or capital gains tax on returns.
This allows for potentially higher returns compared to non ISA accounts making it a valuable tool for long term financial planning.
Understanding ISA allowances is crucial for making the most of tax free savings and investments.
By exploring different types of ISAs, such as cash ISAs, stocks and shares ISAs, and lifetime ISAs (LISAs) you can diversify your investment strategies.
Consolidating ISA providers can also simplify the management of your portfolio.
With careful planning and consideration of factors such as retirement goals and eligibility criteria for government bonuses individuals can maximize their annual allowance while minimising income tax charges.
Tony Shanks