What happens to your ISA at the end of the tax year

Here we are again - the end of another tax year. If you’re looking at your accounts and taxes for the year, remember to put aside some time to think savings, especially the opportunity that comes with a Cash ISA. 

An ISA is a sturdy tool in your financial toolkit, offering a tax-efficient way to save, whether it’s a little or a lot. Within each financial year, you have the chance to save up the ISA allowance  without paying any tax on the interest earned. The ISA allowance for the tax year 2023/204 is £20,000 and it will be the same for 2024/2025. As the allowance resets at the end of the tax year, if you don’t use it, you’ll lose it. 

Maximising your ISA contribution can be a smart move to help you make the most of your tax free savings opportunity. Find out how, right here.

Understanding the ISA tax year

Each UK tax year runs from 6 April to the following 5 April. So if you haven’t reached your £20,000 ISA allowance for this tax year and have more funds to invest, make sure you do this before the switch over.  On the plus side, after the 5th April deadline it’s a new tax year. This means a new ISA allowance, your tax-free allowance is reset back to £20,000 – so you can continue investing into the same ISA from last year and also open a new ISA. Make sure to pop some time in to start researching rates! You can make a start now by taking a look at our Cash ISA options here.

What is the annual allowance for an ISA?

The current ISA allowance is £20,000 for the tax year 2023/2024 and will remain the same for the tax year 2024/2025. Keep in mind that Junior ISA (JISA) are capped at £9,000.

In simple terms, this means that you can have up to £20,000 in ISAs and you’ll not pay any tax on the interest it earns. A Cash ISA can be handy if you have a large savings pot or you’re an additional rate payer and are likely to exceed the personal savings allowance. But remember, the £20,000 ISA allowance is the maximum amount an individual can put into their ISAs in a tax year, but if you have lesser amount to invest you’ll still benefit from tax-free interest.

Find out everything you need to know about ISAs and Tax here.

You may have also heard about the new British ISA being introduced soon. Following the Spring Budget this March, the UK Government announced this new ISA will offer a tax-free allowance of £5,000 to invest in UK equities in addition to the £20,000 allowance. We’re waiting to hear more, but it seems that once the UK ISA is available, savers can potentially take advantage of up to £25,000 of tax-free investments, annually.

More help and support with tax and savings 

To find out the answers to some more common question savers have about tax and your Personal Savings Allowance (PSA), read our blog, Do I have to pay tax on my savings? 

If you’d like to learn more about ISAs, read our blogs, ‘How savings accounts work: ISAs explained’ and ‘Three great benefits for anyone using a cash ISA’.  

If you’re looking to open a savings account, you can find Hodge online rates for ISAs here  

This article is correct at time of publishing and for general information purposes only. We recommend you speak to a professional financial adviser for advice. You can find a financial adviser and further personal finance information at unbiased.co.uk.