Budget Basics: What are ISA Rules for 2020/2021?
On March 11th, 2020 the annual Budget was announced for the upcoming tax year. This set out the rules for the tax year 2020/2021, including the rules for ISAs which will govern how people can use their tax-free allowance in 2020/2021.
On March 11th, Chancellor Rishi Sunak put forward the Budget for this upcoming financial year - and with it, outlined the changes (or lack thereof) for the ISA allowances.
What were the financial takeaways?
The headline, key points which were put forward in this Budget are:
- The JISA will increase substantially to £9,000
- There will be an increase in Stamp Duty for non-UK residents
- There will be an increase in lifetime allowance for pensions
- The threshold for National Insurance will rise
- The existing Term Funding Scheme will be extended
Additionally, Wednesday 11th March 2020 also saw the Bank of England cut its base rate substantially to 0.25% from 0.75% in response to the financial disruption in the British economy caused by the Covid-19 outbreak throughout the world.
What does this mean for ISA savings?
For the overall ISA allowance, there is going to be no change.
This means that for the year 2020/2021, the amount of money every individual is entitled to put into ISAs will remain £20,000 per person.
This can still be spread across multiple ISAs or concentrated in one (with the exception of a Lifetime ISA, which remains at limit a £4000 per year).
For other savings accounts that are not ISAs – for those with an income of £17,500 or less, the starting 0% rate of tax on savings will remain at £5000.
What does the change in JISA limit mean?
The change in the limit of the amount savers are able to put in Junior ISA accounts for their children was the biggest change in the budget.
We’ve written a full blog outlining the ins and outs of this JISA change, but the short version is that this means parents are able to put away up to £9000 per year in an account for their children under the age of 18, which they can then access once they turn 18.