- Will be easier for people to switch Isa provider mid-year
- The measures are a step in the right direction but also a missed opportunity, experts say
Rules on Individual Savings Accounts (Isas) will be changed to allow savers to pay into multiple Isas of the same type in one year and to facilitate transfers between providers.
In today’s Autumn Statement, Chancellor Jeremy Hunt announced the new rules but disappointed savers who had anticipated a complete overhaul, something that was on the cards earlier this autumn.
From April 2024, people will be able to subscribe to multiple Isas of the same type every year and to partially transfer Isa funds between different providers. This should make it easier for savers to switch providers if they are unsatisfied with their service.
The government is also giving the green light for “certain fractional shares” to be held in Isa. This will be a welcome move for young investors and for the platforms offering fractional shares, which are currently locked in a dispute with HMRC on this very subject. But details, and the consequences of the dispute, are not entirely clear yet, with the government stating that it will “engage with stakeholders on implementation”.
Investors will also be able to hold long-term asset funds (LTAFs) and open-ended property funds with extended notice periods in their innovative finance Isas. LTAFs are a new type of fund that invest in long-term illiquid assets such as private equity and infrastructure.
These changes are relatively minor compared to the reforms that were floated in the weeks preceding the Autumn Statement. Notably, the government had reportedly considered offering an extra Isa allowance for people to invest in UK companies, in an effort to boost domestic investment, but this measure was later abandoned.
The Isa allowance will now remain the same at £20,000 a year. Jason Hollands, managing director at Bestinvest, said this is disappointing because the allowance has been frozen since the 2017/18 tax year. “To restore the real value of the allowance to where it was then, it would need to increase to at least £25,760 to adjust for the effect of inflation,” he said.
Experts also argued that these changes fell short of the simplification measures that Isas actually needed. Rachael Griffin, tax and financial planning expert at Quilter, said that “the real issue at hand is the complexity of the current Isa system”.
“The multitude of Isa options available can be daunting for the average saver, potentially deterring them from saving altogether. A more streamlined approach, such as consolidating cash and stocks and shares Isas into a single, more straightforward product, could significantly reduce this complexity,” she argued.
