ISA allowances reset tomorrow and there are new limits – can you save an extra £4,632?

ISA allowances will reset after today as the current tax year comes to a close. It’s only possible to put money into ISAs between 6 April and 5 April, with any unused allowance being lost.

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People are generally encouraged to put as much money as possible into ISA accounts as unused allowances cannot be carried forward.

The limit for the current tax year for the four main types of ISA is £20,000.

This will remain unchanged as we move into the 2020/21 tax year.

£20,000 will be able to be put inside any one account or split among the different types which include cash, life, stocks and shares or innovative finance ISAs.

However, there is a separate ISA which has very different allowances in place.

Junior ISAs are unique options for people who want to save money for their children.

These ISAs offer the same tax incentives as the regular accounts but they can only be opened on behalf of a child by their parents.

Eligibility for these accounts requires the child to be under 18 and live within the UK.

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For the current tax year, which ends today, up to £4,368 can be put inside junior ISAs.

These types of ISA accounts will see the only change in allowances going forward.

As the recent government budget detailed, junior ISA subscription limits will increase to £9,000 from tomorrow.

Many people will likely want to take advantage of these new limits, but there are certain rules in place for how accounts can be opened and contributed to.

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Currently, only parents or guardians with defined parental responsibility can open a junior ISA for under 16s.

To open an account the person involved will need to decide on what type they want (cash or stocks & shares) and what provider they wish to use.

Children aged between 16 and 17 can open junior ISA accounts for themselves but withdrawals cannot be done until they reach 18.

Junior ISAs can be contributed to in the usual manners but cash cannot be transferred between them and adults ISAs.

Junior ISAs will be managed in the child’s name, but the parent or guardian will be responsible for managing the account and will be known as the “registered contact”.

This person will be responsible for things such as reporting changes in circumstances or altering providers. Once the child in question turns 18, the junior ISA will automatically convert to an adult ISA.

Junior ISAs were set up to replace child trust funds and it is possible to transfer money between them.

To move money from an existing child trust fund to a junior ISA the provider should be contacted for arrangement.

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