09 November 2023 , 09:50
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Jeremy Hunt could be set to change ISA rules so that savers can pay into multiple accounts and switch to better rates.
Under current rules, you can only pay into one of each type of ISA in a single tax year - for example, one cash ISA and one stocks and shares ISA. This means some people end up being left with a low-paying account, and no way to move to a new ISA when a better rate becomes available.
Each tax year, you get an ISA allowance of £20,000 and the interest you earn on your money remains tax-free. Changes that would see savers allowed to open more than one type of ISA account are reportedly being considered as part of the Autumn Statement, according to The Telegraph. A Treasury spokesperson told The Mirror: “HMT is receptive to ideas of how we can make ISAs more attractive to encourage people to develop a savings habit and to invest in a way that works for them.”
But in less good news for savers, The Telegraph also reports that the Chancellor has no plans to lift the Lifetime Isa (LISA) limit or scrap the penalty charge for savers who breach it. LISAs allow you to save up to £4,000 each tax year for your first home or retirement.
In return, the Government then gives you a 25% bonus on your savings, so worth up to £1,000 each tax year. But savers who take out money from their LISA for anything other than their first home or retirement face a 25% withdrawal penalty which not only wipes out the bonus, but also part of their original savings.
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MoneySavingExpert.com (MSE) founder Martin Lewis this week called for LISA changes to help first-time home buyers. You can only use your LISA savings to purchase a property worth up to £450,000, or for your retirement.
MSE is calling for the £450,000 limit to be raised to catch up with average property price growth and for the withdrawal penalty to be axed. Martin said: “The simple solution, which could be put into immediate effect, is for a LISA holder purchasing a first-time property for more than the maximum house price, not to be fined. So, they lose the Government’s 25% bonus, but they get their own money and interest back.”
The Telegraph reports that Jeremy Hunt has also abandoned plans to give savers an extra £5,000 Isa allowance to invest in British stocks.