Isas: UK savers to get freedom to chase better deals as rules change | Isas #Isas #savers #freedom #chase #deals #rules #change #Isas

Getting the best out of Isas should become easier for UK savers after the government announced a shake-up that will let them hop on to higher-paying accounts if they become available.

The autumn statement documents revealed ministers are making a series of changes to “simplify” Isas. As well as giving people more choice, these will reduce the risk of people accidentally breaking the rules. But some commentators argued that the various changes made the system more complicated, not less.

Tax-free Isas were introduced in 1999, and there are now six different types. The main two are the cash Isa and the stocks and shares Isa.

Every tax year savers can put money into one of each kind of Isa. They can save up to £20,000 in one type of account or split the allowance across some or all of the other types.

But from next April, savers will enjoy much more freedom and choice. They will be able to sign up to multiple Isas of the same type every year, provided the overall maximum Isa allowance isn’t breached. And partial transfers between different providers will also be allowed.

It means someone could open a Nationwide cash Isa in the autumn, then (assuming they have not used up all their allowance) they could take out a Halifax cash Isa after Christmas, and then pay into a Barclays cash Isa in the spring.

“The move to allow savers to open more than one Isa of each type will give them the freedom to shop around for the best deal,” said Karen Barrett at the financial adviser website Unbiased.

For cash Isa savers, the changes offer the opportunity to jump on to new, more competitive deals, added Sarah Coles at the investment platform Hargreaves Lansdown.

However, they were both disappointed that Jeremy Hunt did not take the opportunity to increase the overall Isa allowance. While £20,000 a year is more than enough for most people, upping the allowance would mean better-off people and those who have received a windfall could shelter more of their cash.

The allowance was last changed in 2017, so it would need to rise to more than £25,000 to keep pace with inflation, Coles said.

Cash Isas are the most popular type of Isa, and – after several years during which they fell out of favour with many people – they look set to make something of a comeback. That is because higher savings rates are likely to land hundreds of thousands more people with an unwelcome tax bill for their nest-egg cash if they didn’t, or don’t, use an Isa to protect their money. With some standard savings accounts offering almost 6% interest, some individuals with an emergency savings pot of less than £10,000 could find themselves breaching the personal savings allowance.

At the time of writing, the top-paying fixed-rate cash Isa was at Metro Bank, paying 5.71%. It also had an instant access Isa paying 5.11%. Virgin Money was offering a one-year deal paying 5.65%, though this was only open to people with a Virgin Money, Clydesdale Bank or Yorkshire Bank current account.

The chancellor also announced a few other tweaks to the Isa regime, including allowing “fractional shares” to be held within Isas. As the name suggests, a fractional share is a portion of a full share, and they allow people who don’t have enough money to buy a whole share to still invest in a business, Andrew Tully at the financial firm Nucleus said.

“Allowing people to hold fractional shares in Isas is a positive move, and may be appealing to younger generations in particular, who would like to invest in expensive stocks such as Apple, Tesla and Amazon,” he added. For example, this week Apple was trading at $191 (£152) a share.

#Isas #savers #freedom #chase #deals #rules #change #Isas

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