Autumn Statement: ISA shake-up announced – though no win for Lifetime ISA savers
A raft of changes for savers using ISAs – savings accounts where you'll never pay tax on the interest – have been announced by the Chancellor in today's Autumn Statement. However, Jeremy Hunt failed to address MoneySavingExpert.com's calls for a shake-up to Lifetime ISAs.
MSE's Autumn Statement 2023 coverage
Check out all of our other MSE News stories following the Chancellor's announcements:
- Full round-up of the key measures, including MoneySavingExpert.com founder Martin Lewis's analysis of what they mean for you.
- Workers to pay less national insurance from next year.
- State pension and benefit rises confirmed.
ISA changes include tweaking the rules on subscriptions and transfers
- You will be able to pay into multiple ISAs of the same type in each tax year. This is a reversal of the current system – which limits you to subscribing to (paying into) just one ISA of each type per tax year.
There are five types of ISA – cash ISAs, stocks & shares ISAs, Lifetime ISAs, innovative finance ISAs, and Junior ISAs – and you can currently choose whether you want to invest the whole up to £20,000 annual ISA allowance in to one type of ISA, or whether you want to split the allowance between the different types.
While it's not currently possible to pay new money into more than one of any of these in a given tax year, from next April this will be possible. This will make things simpler for both cash savers and investors – cash savers will be able to open multiple new cash ISAs as new deals with higher interest rates become available, while investors will more easily be able to try out different stocks & shares ISA providers, for example.
- You will be able to do partial transfers of ISA funds regardless of when you paid in the money. Currently, you can only do partial transfers of funds that you've paid in before the current tax year – if you want to move money you've paid in since 6 April, you need to do so in full. For example, from next April, if you've £15,000 in a cash ISA and you want to move just £10,000 of it to a new provider, you will be able to, regardless of when that £15,000 was paid in.
However, transferring an old ISA is a technical process – it's not just like switching a normal savings account. Never withdraw money from an ISA directly – you'll immediately lose all the lasting tax benefits if you do. Instead, speak to the new provider and fill in an ISA transfer form. Your new provider should then sort it all out, including moving the money over for you and keeping your ISA cash permanently tax-free.
- You'll need to be 18 or over to open a cash ISA. Currently, you can open an adult cash ISA from age 16. In future, it will be age 18 for all adult ISAs (you can still save in a Junior ISA up to age 18). This means someone aged 16 or 17 now might want to consider opening and putting money into a cash ISA before next April while they still can.
- The amount you can save in ISAs and JISAs ISN'T changing. For the 2024/25 tax year, the Government is freezing the annual amount you can save at: £20,000 for ISAs, £9,000 for JISAs and Child Trust Funds, and £4,000 (excluding the Government bonus on top) for LISAs.
- You'll be able to invest in certain 'fractional shares' within stocks & shares ISAs in future. Currently, investors can buy shares in companies and hold these within stocks & shares ISAs, so any gains are tax-free. At present, the official rules say you must hold at least one share in full. However, even one share of a big company can cost £100s, so the Government plans to allow savers to hold a fraction of a share in their ISA. Exact details are currently scarce, though the Government has said it will engage with stakeholders on this.
- A shake-up to the 'Help to Save' scheme is in the pipeline. While it's not classed as an ISA, Help to Save currently gives low-income earners claiming Universal Credit or Working Tax Credit a 50% tax-free bonus on the amount saved, up to a maximum of £1,200 over four years. The Government says it will consult on reforming the scheme to ensure its "sustainability", to "encourage take-up" and to "provide the best value to taxpayers".
However, MoneySavingExpert.com founder Martin Lewis said he hopes any changes won't make the popular scheme less generous for savers.
LISAs are designed to help people aged 18 to 39 buy their first home or, much less popularly, save for retirement. Savers get a 25% government boost when they use the funds to buy a qualifying first home. They're a powerful product – still beneficial to many – which can give a huge boost to first-time buyers' savings.
Yet the LISA property price limit of £450,000 has been frozen since the product launched in April 2017. Since then – even after recent corrections – there has been substantial growth in property prices and this has led to some young people, especially in expensive urban areas, being priced out of the benefits and having to pay a fine to access their own money.
MoneySavingExpert.com and its founder Martin Lewis have been campaigning for the Government to overhaul "dead duck" LISAs to allow savers using LISA money to buy a home that's now over the limit to withdraw the money without penalty immediately. In the longer term, we would like to see the £450,000 LISA limit raised to catch up with average property price growth and then index-link the threshold to house prices thereafter.
However, no changes to the LISA were included in Hunt's speech today or in any of the Treasury's follow-up documents. Here's Martin's instant reaction to this on X, formerly known as Twitter: