The chancellor didn’t mention the humble Individual Savings Account (ISA) in his long speech, but there have been some important tweaks to ISAs that are worth noting.
In the end ISA savers didn’t get an extra allowance but a quick glance at page 90 of the full Autumn Statement document suggests change is still afoot.
The biggest change, and one that was well trailed by the media, is that savers and investors will be able to hold multiple ISA subscriptions from April 2024. At the moment if you open a cash or stocks & shares ISA with one provider, you have to stick with them for that tax year.
A round-up of the main changes is in the table below.
Partial transfers will also be allowed between providers. And you won’t need to reapply to “reopen” a dormant ISA, as is the current rule. There are also changes to the Innovative Finance ISA, so if you own of these it’s worth checking your fine print or speaking to an adviser – from 2024 you’ll be able to invest in Long-Term Asset Funds and open-ended property funds with notice periods in your Innovative Finance ISA.
Megan Rimmer, a chartered financial planner at Quilter Private Client Advisers, says today’s ISA changes will be especially helpful to those with fixed-rate cash ISAs. If a more competitive product is launched with better rates – especially as interest rates have soared – currently you’re “stuck” with the product you bought. Soon you’ll be able to just open a new product with a provider offering better rates. She says this change will be good for competition generally.
Fractional Ownership: Gamechanger?
Nevertheless, the overall feeling was of disappointment. Overall ISA limits were not increased in line with inflation. And some had suggested the speech might include a boost to the Lifetime ISA allowance or an increase to the £20,000 overall allowance. The Junior ISA also stays at £9,000 for the 2024-2025 tax year at least. No change there. Nor did we get a “British ISA”.
“These are broadly welcome measures, that provide greater flexibility. However, they do not amount to the radical shake-up being mooted just weeks ago,” says Jason Hollands, managing director of investment platform Bestinvest.
Some changes to look out for in the future that will affect ISA investors involve “fractional share ownership”.
“The government intends to permit certain fractional shares contracts as eligible ISA investments and will engage with stakeholders on implementation,” he says.
What this means is that you won’t need to own a complete share of a company; while current UK platforms offer monthly investing from as little as £25 a month, many individual shares are much higher than this.
From the US, we have some examples: Nvidia [NVDA] is $480, Apple [APPL] is $191 and Meta Platforms [META] is $340. While stock splits are common in the US, UK investors can’t just buy “£25 worth of Apple”. Curiously, you can do this on an (unregulated) Bitcoin market – one Bitcoin costs you $36,377 but that’s out of the reach of most.
Simon Harrington, head of Public Affairs at investment trade body PIMFA says: “this could provide millions of mass market savers and investors to access high performing – albeit often expensive – shares in well-known companies as part of their portfolio.”
At Morningstar.co.uk we’ll look at this issue in depth in the coming months, especially as it pertains to low-cost index trackers.
