Chancellor Jeremy Hunt is rumoured to be planning changes to the ISA regime, to be announced in the Autumn Statement later this month.
Potential changes could mean savers and investors can move their money to better paying ISAs more easily. The idea is that the rule change will encourage providers to offer more competitive rates, and allow savers to make hundreds of pounds more in tax-free interest every year.
Savers are currently restricted to opening and putting money in just one of each type of ISA a year. For example, one stocks and shares ISA and one cash ISA. But rule changes could allow savers to open multiple ISAs of the same type in a single tax year without losing their £20,000 allowance.
However, sources say there are no plans to increase the annual ISA limit from £20,000 or to scrap the little-known and high-risk innovative finance ISA.
In a blow to potential first-time buyers, there are also no known plans to increase the Lifetime ISA limit (currently £4,000) or scrap the penalty charge for savers who breach it.
ISA changes ‘a major win’ for savers
Dean Butler, managing director for retail direct at Standard Life, said: “Savers who subscribed to a fixed rate cash ISA earlier this year will have watched as the rates available on the market climbed higher and higher. 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 case for taking out multiple investment ISAs within a tax year is less obvious given many providers offer access to a wide range of different investments within the ISA wrapper already but in those cases where customers want to access a specific investment that’s not available to them or a specific product feature, it could be a useful addition.”
The ‘Everything’ ISA
Phil Hall, director of Hall PR & Public Policy, said: “Several years ago, we had the idea to scrap some of the more obscure ISA savings products, lump the cash ISAs and investment ISAs together in what we simplistically termed the ‘Everything ISA’ as well as removing the £20,000 annual ISA savings limits in favour of a lifetime limit that matches the lifetime savings limit for pensions.
“Although this was back in 2018, the basic premise remains sound today and is well worth considering. So, if the Government is serious about simplifying the ISA regime and encouraging the savings habit, then re-examining these ideas would be a great starting point.”
