Published On: Sat, Nov 11th, 2023

Jeremy Hunt’s ‘ISA shake-up’ in Autumn Statement could see savers offered higher rates | Personal Finance | Finance

Jeremy Hunt could be using his Autumn Statement to announce an ISA shake-up, which should encourage cash ISA providers to offer more competitive rates, and allow savers to make hundreds of extra pounds in tax-free interest.

Current rules already allow people to open multiple ISA accounts in a tax year, but they need to be different types of ISA – for example, a saver may open a stocks and shares and a cash Isa in the same tax year.

ISAs have the advantage of being ring-fenced from the taxman for as long as they remain in their ISA “wrapper”, and savers can put away up to £20,000 per year.

However, experts said the potential opportunity to open multiple ISAs of the same type could make it easier for savers to benefit from improved rates and grab a good deal when they see it.

There are not expected to be any changes to the lifetime ISA regime.

Campaigners had been calling for the exit penalty to be scrapped and for the £450,000 property limit to be increased.

Dean Butler, managing director for retail direct at Standard Life, part of Phoenix Group said: “The ability to start saving into another cash product mid way through the tax year would be a major win for people in this situation and could also incentivise providers to improve rates.

“There are also likely to be some customers who want to mix fixed rate deals and easy access savings to give them greater flexibility with their savings and this type of proposal could help them.

The Daily Telegraph reported that Chancellor Jeremy Hunt is preparing to make it easier for savers to move their money with a shake-up to allow people to open multiple cash Isas.

It said sources close to the discussions said that ministers are wary of implementing too many changes to the Isa regime before the next tax year starts in April.

Reacting to rumoured upcoming changes to ISA allowances, Brian Byrnes, head of personal finance at Moneybox said: “Since their introduction, ISAs have been an effective way for people to secure tax-free returns on their money – latest official HMRC figures show that almost 12 million people opened an ISA in the tax year 2021-2022.

“However, with current bank rates at their highest in over a decade, it has never been more important to make sure our money is working as hard as possible.

“The anticipated changes in the Chancellor’s statement to give savers more ISA flexibility, and freedom to open multiple accounts, would be a welcome shift for millions across the country – allowing people to best-optimise their tax-free allowances and shop for the best deals available to them. But this alone will not be a silver bullet for savers.”

Sarah Coles, head of personal finance at the wealth manager Hargreaves Lansdown explained the Autumn Statement is “a brilliant opportunity to make vital changes to ISAs”, but it is “incredibly disappointing if Hunt has decided not to revisit the lifetime ISA penalty”.

Seconding that opinion is Mr Byrnes who has urged the Chancellor to further consider calls to futureproof the Lifetime ISA (LISA) to ensure “better and much-needed support” for first-time buyers as well.

Although the tax penalty for early withdrawal has helped people commit to their savings goals, he stated it’s important to recognise and reward the efforts that LISA savers are making, without penalising them for accessing their money in an emergency.

He continued: “We’re calling for the Chancellor to consider introducing an ‘Annual Emergency Withdrawal Allowance’ among other measures, so savers are not penalised if they need emergency access to their savings.

“The Lifetime ISA is a fantastic product that’s already helped a whole generation of buyers, but it’s vital Treasury ministers consider updating the product rules which have not been reviewed since the LISA first launched in 2017.

Source link

Most Popular News