Savers will be able to hold multiple Isas without a tax penalty, under reforms being considered by the Chancellor that could spark a savings war.
Currently, investors can only open and pay money into one of each type of Isa every tax year.
But ahead of the Autumn Statement on November 22, Treasury officials are reviewing plans to allow savers to open multiple accounts of the same type per tax year.
This could trigger a frenzied competition among cash Isa providers to offer better rates.
Savers could also make hundreds of extra pounds in tax-free interest by shopping around without the existing barriers.
The Chancellor is not expected to increase the £20,000 annual allowance or make changes to the lifetime Isa
At present, anyone who opens more than one type of cash Isa can be charged tax on interest they earn and will have their second account shutdown. This means they risk missing out on unused tax allowances.
The Treasury and HMRC have held a series of discussions with industry experts over the past six months to consult on major Isa reforms, insiders have told the Mail. The Treasury presented a ‘menu’ of changes during its last meeting two weeks ago that could be unveiled later this month.
Among the mooted reforms were plans to merge cash Isas with stocks and shares Isas, rename stocks and shares Isas to ‘investment Isas’ and rebrand Innovative Finance Isas.
Treasury ministers are said to be considering new tax incentives for savers who invest in British stocks.
However, the Chancellor is not expected to increase the £20,000 annual allowance or make changes to the lifetime Isa. Campaigners have been calling for the exit penalty to be scrapped, and for the £450,000 property limit to be increased.
Tom Selby, of Isa provider AJ Bell, said the new rule would enable savers to test multiple stockbrokers before making their choice.
‘It’s nonsensical that people can only pay into one of each type of Isa.. There’s no need for that rule to be in place,’ he says.
‘It would make it possible for someone who isn’t sure which investment platform they want to use to road test it in the same year.’
Savers could also make hundreds of extra pounds in tax-free interest by shopping around without the existing barriers
This could spark interest rate competition between providers, Mr Selby added.
Sarah Coles, of stockbroker Hargreaves Lansdown, said that allowing savers to open more than one of each type of Isa would protect many who inadvertently fall foul of the rules.
She said: ‘People fall into this by accident because it is a little known rule and it can cause real problems when they find they have to pay tax.
‘This would make it much easier to open, subscribe and transfer Isas, and remove a layer of needless complexity.’
Alice Guy of Interactive Investor warned that Isas were at risk of becoming overly complex and difficult for DIY investors to navigate.
She said: ‘Policymakers need to ensure Isas do not mirror the complexity that the UK’s pension system has accumulated over time.’
Compare the best DIY investing platforms and stocks & shares Isas
Investing online is simple, cheap and can be done from your computer, tablet or phone at a time and place that suits you.
When it comes to choosing a DIY investing platform, stocks & shares Isa or a general investing account, the range of options might seem overwhelming.
Every provider has a slightly different offering, charging more or less for trading or holding shares and giving access to a different range of stocks, funds and investment trusts.
When weighing up the right one for you, it’s important to to look at the service that it offers, along with administration charges and dealing fees, plus any other extra costs.
To help you compare the best investment accounts, we’ve crunched the facts and pulled together a comprehensive guide to choosing the best and cheapest investing account for you.
We highlight the main players in the table below but would advise doing your own research and considering the points in our full guide linked here.
>> This is Money’s full guide to the best investing platforms and Isas
Platforms featured below are independently selected by This is Money’s specialist journalists. If you open an account using links which have an asterisk, This is Money will earn an affiliate commission. We do not allow this to affect our editorial independence.
| Admin charge | Charges notes | Fund dealing | Standard share, trust, ETF dealing | Regular investing | Dividend reinvestment | ||
|---|---|---|---|---|---|---|---|
| AJ Bell* | 0.25% | Max £3.50 per month for shares, trusts, ETFs. | £1.50 | £9.95 | £1.50 | £1.50 per deal | More details |
| Bestinvest* | 0.40% (0.2% for ready made portfolios) | Account fee cut to 0.2% for ready made investments | Free | £4.95 | Free for funds | Free for income funds | More details |
| Charles Stanley Direct | 0.35% | No platform fee on shares if a trade in that month and annual max of £240 | Free | £11.50 | n/a | n/a | More details |
| Fidelity* | 0.35% on funds | £7.50 per month up to £25,000 or 0.35% with regular savings plan. Max £45 per year for shares, trusts, ETFs | Free | £7.50 | Free funds £1.50 shares, trusts ETFs | £1.50 | More details |
| Hargreaves Lansdown* | 0.45% | Capped at £45 for shares, trusts, ETFs | Free | £11.95 | £1.50 | 1% (£1 min, £10 max) | More details |
| Interactive Investor* | £4.99 per month under £50k, £11.99 above, £10 extra for Sipp | £3.99 per month back in free trading credit (does not apply to £4.99 plan) | £3.99 | £3.99 | Free | £0.99 | More details |
| iWeb | £100 one-off (no fee until end of 2023) | £5 | £5 | n/a | 2%, max £5 | More details | |
| Accounts that have some limits but attractive offers | |||||||
| Etoro* No Isa or Sipp | Free | Investment account offers stocks and ETFs. Beware high risk CFDs in trading account | Not available | Free | n/a | n/a | More details |
| Freetrade* No investment funds | Free for Basic account, £4.99 per month for Standard with Isa £9.99 for Plus | Freetrade Plus with more investments and Sipp is £9.99/month inc. Isa fee | No funds | Free | n/a | n/a | More details |
| Vanguard Only Vanguard’s own products | 0.15% | Only Vanguard funds | Free | Free only Vanguard ETFs | Free | n/a | More details |
| (Source: ThisisMoney.co.uk Sept 2023. Admin % charge may be levied monthly or quarterly | |||||||
