PSA Autumn Statement ISA changes have legislation ready for 6th April now

[perseverancethroughfaith]

My RSS feed subscription managed to pick up the changes to the ISA legislation, so I've found the Autumn Statement ISA changes will be going ahead.

A summary from the change document:

These Regulations amend the Individual Savings Account Regulations 1998 by:

• increasing the age at which a cash ISA can be held from 16 to 18, except in relation to individuals who are 16 or 17 years old on 5th April 2024 (and who have not subsequently reached the age of 18) who can continue to have, apply for or transfer a single cash ISA account (regulations 2, 17(a)(i) and 19(b)(iii));
• updating definitions relating to certain investment funds (regulation 4);
• permitting an individual to subscribe to more than one ISA account of the same type in a tax year, allowing the partial transfer of subscriptions made in the current tax year and removing the requirement to make a fresh application to open an account that they already hold (regulations 5, 6, 7(a) and (b), 8, 9, 11, 12, 13, 15, 17(a)(ii) and (b), 19(a), (b)(i) and (ii) and (c) and 23(a) to (c));
  • not the case for Lifetime or Junior Cash ISAs or Junior S&S ISAs
• removing transitional provisions relating to the introduction of Lifetime ISAs in the tax year 2017/18, which are now obsolete (regulations 7(e), 10, 18, 23(e) and 25(a), (b) and (d));
• allowing certain investments to be held in an innovative finance account, where those investments are subject to a notice period that means they cannot be held in a stocks and shares account (regulations 7(c) and (d), 14, 16 and 24);
• removing a provision which allowed certain institutions based in EU member states to conduct business without being present in the United Kingdom (regulation 20);
• allowing HMRC to withdraw their approval of an account manager who has not acted as such within 18 months of being approved (regulations 21 and 22(b) and (c));
• correcting a typographical error in an earlier amendment (regulation 22(a));
• removing a requirement for an account manager to provide information about a transfer if they are transferring the account to themselves (regulation 23(d));
• providing that a first-time residential purchase will not qualify as a withdrawal from a Lifetime ISA if the purchase is funded by a loan from a person who is connected to the account investor (regulation 25(c)).

source: https://www.legislation.gov.uk/uksi/2024/350/made

edit: also a newsletter has been published that details the changes in an easier to read way https://www.gov.uk/government/publi...-newsletter-11/tax-free-savings-newsletter-11

 

[sashieng]

@perseverancethroughfaith Thanks for posting about this, really helpful.

If I'm reading your last bullet correctly, might this have the possibility of having a significant impact on how patents (etc) might 'donate' money to help their kids buy a property when using a LISA e.g. it must be gifted without reservations?

 

[perseverancethroughfaith]

@sashieng going back to the source change:

(c)in paragraph 7 (definitions for the purposes of paragraph 6), after the definition of “a legal interest in land” insert—““loan” does not include a loan made by a person who is connected to the account investor, and for this purpose “connected” has the meaning given by section 993 of ITA 2007(10);”;

and the area it refers to:

(6) The purchase must be—

(a)funded by a loan that will be secured by a charge over the land by way of—

(i)a legal mortgage (if land in England and Wales),

(ii)a heritable security (if land in Scotland), or

(iii)a legal charge, mortgage by conveyance, demise, assignment or sub-demise (if land in Northern Ireland); or

(b)made under the terms of a regulated home purchase plan.

yes it might be, if the loan was deemed to have a charge over the land, but fine if a gift

 

[godsgirl]

@perseverancethroughfaith I think it's trying to make sure that you're buying with a "real" mortgage. Presumably some buyers who don't need a mortgage have discovered that they can qualify for the bonus with a token interest-free mortgage from the bank of mum and dad.

 

[echo17]

@sashieng I thought this too.

I think in reality it won't make much of a difference because the rules on gifting to family are so relaxed and are so rarely investigated that you can pretty much give however much you want to your children for a first home.

It would also really prove once and for all that the Tories have zero interest in helping young people get on the ladder given how many first time buyers do get parental support.

It would effectively render the LISA useless to the majority of the population.

So I'm not really sure who that change is aimed at...

Maybe parents who want to evade CGT so they "gift" their children a deposit under the condition that they get their "gift" + returns back when the children sell up and move onto their second home? I know a few who have done this and it seems very easy to get away with.

 

[perseverancethroughfaith]

Amendment of regulation 5DDB15. In regulation 5DDB (flexible account)—

(a)omit paragraph (2);

(b)in paragraph (3) omit “other”l

(c)in paragraph (6) omit “of the whole of previous years’ subscriptions”.

ugh this is bad not great, for Flexible ISAs you wont be able to replace current tax year subscriptions into any other ISA than the original

edit:

however the ability to do partial ISA transfer of current tax year contributions makes up for it.

 

[treyarch1]

@perseverancethroughfaith It's not that bad - with the new rules about transfers, wouldn't you be able to just put the money back in the flexible ISA and immediately transfer it somewhere else?

 

[perseverancethroughfaith]

@treyarch1 You would yes and with being able to partially ISA transfer that's ok.

It's just the replacement of current tax year contributions into another type of ISA helped speed things up.

I've had some Cash ISA transfers take only one day recently though.

 

[perseverancethroughfaith]

@treyarch1 Although having read more about the partial transfers for current tax year contributions, ISA managers don't have to offer it, and it'll only work when both ISA managers (sender and receiver) support partial transfers.

So a potential nightmare of confusion/complaints in store. The ISA managers will need to list it as a product feature.

 

[jb21]

@perseverancethroughfaith I thought that was already the case, it was certainly the intent.

 

[perseverancethroughfaith]

@jb21 no, previously you could replace Flexible ISA withdraws of current tax year contributions into another type of ISA (paragraph (2)%C2%A0Subject%20to%20regulation)). That was the intent, and was clearly defined in guidance examples as well.

Since it didn't add any ISA manager / HMRC overhead (i.e. ISA manager reports (for Flexible ISAs) just the sum of deposits and withdrawals for current tax year contributions) I don't see a reason to scale it back to this. Perhaps as HMRC is pushing towards more real-time reporting of subscriptions it would have added overhead.

I could see this as a simplification for ISA managers / HMRC, as there is becoming less strictness in handling differences between current and previous tax year contributions.

 

[chrissum]

@perseverancethroughfaith Well that is a bit irritating.

 

[clear2learnfaith]

@perseverancethroughfaith A shame they didn’t fix the thing about fractional shares not being allowed to be in an ISA, with all the difficulty HMRC have caused. Seems a particularly stupid rule HMRC are trying to enforce, especially when you consider what a share is in the first place.

 

[perseverancethroughfaith]

@clear2learnfaith They weren't planning to legislate for it so soon, just starting a consultation and review period

 

[usernasanxiety]

@perseverancethroughfaith

permitting an individual to subscribe to more than one ISA account of the same type in a tax year

While I'm pleased about this, those looking to act upon it should remember the annual contribution limits and be sure that they don't fall foul of them.

 

[shadow2]

@usernasanxiety (...which investors have always had to do anyway).

 

[perseverancethroughfaith]

We wont be able to contribute new subscriptions to multiple Lifetime ISAs / Junior Cash ISAs / Junior S&S ISAs as those are excluded

From the newsletter on the 2nd link

The exceptions are that:

* investors with a Lifetime ISA (LISA) are still restricted to subscribing to one LISA a year

* investors with a Junior ISA (JISA) are still restricted to subscribing to one of each type in a year

* under 18s affected by the transitional arrangements set out at 1.1 are not permitted to subscribe to more than one cash ISA in a tax year