This year’s Autumn Budget takes place next week, on Wednesday 30 October.
With Rachel Reeves’ claim that she has a ‘£22bn black hole’ in the public finances to fill, the rumour mill is in full flow.
Despite election promises, nothing is off the table. The government has a large majority, so it’s within their power to make changes to ISAs if they choose to.
The rules around how much you can pay in to ISAs, and the different types of ISA available, have changed and evolved significantly since these tax efficient wrappers were first introduced in 1999.
But the annual ISA allowance, unlike pension allowances, has only ever been increased.
It started at £7,000 in 1999, then went up to £7,200 in 2008 and £10,200 in 2011, then to £15,000 in 2014 and finally in 2017 to £20,000, where it’s stayed since.
While we think it would be unwise to reduce the allowance next week, ISA and tax rules do change. Any benefits depend on your circumstances and making the most of what’s currently available.
It’s worth noting that last year the Resolution Foundation, a research organisation that seeks to improve living standards for those on low and middle incomes, called for a lifetime cap on ISA savings of £100,000.
“At HL we believe ISAs are a crucial cornerstone of investing in the UK, and maintaining the £20,000 tax-free allowance is key to encouraging greater long-term investing and saving. Any moves to reduce the allowance or to place a lifetime cap on ISA savings could hammer the important challenge we all face in building our long-term financial resilience.”
Maike Currie, Head of Content
This isn’t personal advice. If you’re not sure what’s right for you, ask for financial advice. Investing for longer increases the likelihood of positive returns. Over a period of five years or more, investments usually give you a higher return compared to cash savings. But unlike cash, investments can go down as well as up in value, so you could get back less than you put in.
Take advantage of your £20,000 ISA allowance with our most popular account.
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Tax changes on the horizon?
Labour didn’t rule out rises to capital gains tax (CGT), or a reduction in the dividend allowance, in their election manifesto. This, alongside government warnings that the Budget will be ‘painful’, have fuelled speculation that we’re heading for more tax on investments, particularly capital gains tax (CGT).
We could also see changes to the dividend allowance, which has already been cut steeply twice in recent years by the Conservative government.
We won’t know whether these rumours are true until the day of the Budget. The same is true of ISA rule or allowance changes.
But we do know that over recent years, the CGT allowance has been falling – forcing more people to pay more tax. It was halved from £6,000 last tax year, to £3,000 this year. The dividend tax allowance has shrunk, from £2,000 to £500. And could potentially be scrapped altogether.
Could Autumn Budget tax changes make ISAs even more attractive?
Whatever happens in the Budget, now could be a good time to secure this year’s ISA allowance. Anything you’ve already paid in, or you pay in today, will be sheltered from UK income and capital gains tax.
With HL, you can choose from a Stocks and Shares ISA, Cash ISA, Lifetime ISA, or Junior ISA for children. You also have the flexibility to divide your ISA allowance between cash and investments. For example, you could put £5,000 in a Cash ISA and then the remainder (£15,000) in a Stocks and Shares ISA.
Hear why Jack chose HL for his family’s ISAs
HL client, Jack, shares his experience of investing. Hear how he invests in his own Stocks and Shares ISA, alongside Junior ISAs for his two children.