After weeks of speculation regarding what reforms would be announced, Chancellor Jeremy Hunt finally delivered his much-anticipated Autumn Statement on Wednesday 22nd November.
Within it were 110 measures aimed at promoting economic growth, with an evident focus on raising business investment, reducing inflation and increasing GDP.
Some of the key announcements included a cut to National Insurance for both the employed and self-employed, the ‘Full Expensing’ tax break for UK businesses being made permanent, and a boost to the investment zones across the country by way of a five year extension on their financial incentives.
It was also incredibly encouraging to see that the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) sunset clause has been extended by a decade, with the schemes now running until 2035. This will be greatly welcomed by investors looking to make use of their generous tax incentives (which includes up to 30% income tax relief), and it once again shows that the Government understands how important incentives such as these are for encouraging investment.
But it was the ISA changes – which were tucked away within the Statement’s accompanying documents – that really caught my attention.
There had been much discussion around how the ISA market may have been overhauled in the Autumn Statement, and many of the speculated changes did not come to fruition. Those that did, however, are significant.
Firstly, there was confirmation that the ISA allowance will remain frozen at £20,000 for 2024/25. Many had hoped for an increase to the allowance that has stayed the same since its last hike in 2017/18, but this won’t be happening just yet.
Whilst this is somewhat disappointing, it’s worth noting that research from Sanlam in 2021 found that among investors with at least £50,000 in investable assets, fewer than half had made use of their annual ISA allowance in full.
For those able to do so, maximising the ISA allowance is hugely important to consider. The tax reliefs offered by ISAs are some of the most generous available in the UK, and with the allowance frozen once again, using it to its full potential wherever possible is crucial.
Simplification was apparently one of the Chancellor’s key focuses when making the ISA changes, and the rules surrounding ISA transfers and the number of ISAs that can be opened per year can be confusing.
I believe the changes to these rules – whereby more than one of each type of ISA can be opened each tax year and partial transfers between ISA accounts can be made at any time – will go a long way in simplifying the product.
These changes also allow for even greater diversification within an ISA portfolio, with the ability to move capital with more flexibility and to gain exposure to a larger spread of assets, from rainy day cash to the long-term outlook of shares and the mid-term outlook of property bonds, for example.
However, one of the most telling ISA reforms from my perspective is that of expanding the list of IFISA-eligible investments to include long-term asset funds and open-ended property funds with extended notice periods.
Some people wondered whether the underutilised IFISA would be abolished altogether in a bid to streamline the ISA offering, but this move from the Chancellor is quite the opposite.
By providing this boost to the IFISA, the Government is exhibiting confidence in the product and its place within the ISA market.
Overall, it was an Autumn Statement packed with interesting measures, particularly for investors.
Whilst we didn’t get all we had hoped for or expected – namely an increased ISA allowance – I’m delighted by the ISA reforms we did get, and hope the IFISA boost in particular helps to broaden this excellent product's reach.
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