Chancellor Jeremy Hunt announced changes to Individual Savings Accounts (ISAs) in the recent Autumn Statement, effective April 2024. These changes are designed to make ISAs more flexible and more accessible for savers, but disappointing for the market, too, due to some of the rumours spreading around.
Key Changes to ISAs
- Multiple ISA subscriptions of the same type: Savers will be able to hold multiple ISA subscriptions of the same type in a single tax year. They can spread their ISA allowance across numerous providers or investment options.
- Partial transfers between providers: Savers will be able to transfer part of their ISA holdings from one provider to another. This will make it easier to consolidate ISA holdings and shop around for better rates.
- No need to reapply for existing ISAs: Savers will no longer need to reapply for their existing ISAs each year. This will save them time and paperwork.
- New 18+ age limit for all adult ISAs: The minimum age to open an adult ISA will be raised from 16 to 18. This aligns with the age limit for other financial products such as pensions and mortgages.
- Certain fractional shares will be ISA eligible: The government will consult on allowing certain fractional shares to be held in ISAs. This would make it easier for savers to invest in expensive shares. I own several fractional shares in my ISA and SIPP portfolios, so as soon as the government comes to a decision, we can all feel more comfortable investing further.
Rumours Before the Statement
In the lead-up to the Autumn Statement, there were many rumours about potential changes to ISAs. I was excited about a few of them. Some of these rumours included:
- An increase in the ISA allowance: Anticipation was high for a potential rise in the annual ISA allowance from £20,000. This allowance has remained unchanged since the 2017/18 tax year, leaving many individuals, including several I know, who rely solely on ISAs for their investments feeling restricted. Maintaining the fixed allowance for over seven years seems counterproductive, especially considering the evolving financial landscape.
- The introduction of a new ‘British Isa’: The prospect of a new ISA specifically for investments in UK-based companies, which had been circulating in the Autumn Statement, failed to materialise. This is despite British individuals’ relatively low investment rate compared to their American counterparts, which has been a concern for the UK stock market. A “British ISA” could have been a valuable initiative to encourage investment in British companies and bolster the domestic economy.
- A change to the Lifetime ISA bonus: There was speculation that the government would change the Lifetime ISA bonus, which is a 25% government bonus on contributions up to £4,000 per year. However, the bonus will remain unchanged.
All in all, the ISA changes announced in the Autumn Statement are positive for savers. They will make ISAs more flexible and easier to use and give savers more options for investing their money.