Guidance

Tax-free savings newsletter 11

Updated 2 May 2024

1. Individual Savings Account (ISA) reform 2024

At Autumn Statement 2023, the government announced a package of ISA reforms, which come into effect from 6 April 2024.   

1.1 Increase the age for opening cash ISAs from 16 to 18 years old and over

From 6 April 2024 it will not be possible for anyone aged 17 and under to subscribe to more than one cash ISA. This is a mandatory change with transitional arrangements.

Transitional arrangements

The transitional arrangements end at midnight on 5 April 2026.

If, at 5 April 2024, an individual is 16 or 17 and does not have an existing cash ISA, they will be eligible to apply for, and subscribe to, a single cash ISA in any tax year until their 18th birthday. 

Where an individual aged 16 or 17 holds an existing cash ISA, they may continue to subscribe to it or transfer it to another cash ISA after 6 April 2024. 

Where an individual aged 16 or 17  has a cash ISA on fixed rate or fixed terms and it ends, maturing funds may be transferred to a new cash ISA, or the existing manager may transfer funds to a new or continuing product where this is provided for in the term and conditions of the existing account.

You may accept a transfer of an existing cash ISA held by an individual aged 16 or 17, but all current year subscriptions must be transferred, and the original account closed.

An individual aged 16 or 17 with a cash ISA is eligible for additional permitted subscriptions to that ISA, however any current year subscriptions must be transferred in full.

ISA managers can choose whether to offer cash ISAs to individuals who fall within the transitional arrangements.

1.2 Allow subscriptions to multiple ISAs of the same type, except for Lifetime ISA and Junior ISA

This change is not mandatory, and managers can choose to limit subscriptions to only one ISA held with them in any tax year. 

This removes the restriction on subscribing to only one ISA of each type per year, however all subscriptions must remain within the overall ISA subscription limit of £20,000.  

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

You are still responsible for making sure the overall ISA limit is not exceeded for subscriptions made with you. It’s not possible for you to know if investors are subscribing, or have subscribed, with other ISA managers, nor the amount of any such subscriptions. Individual investors remain responsible for managing their overall subscription limits.   

Where an investor holds more than one ISA with the same manager, when reporting to HMRC you must include details of each ISA separately. This includes details of multiple separate ISAs of the same type. 

1.3 Remove the requirement for an investor to make a new ISA application where an existing ISA account has received no subscription in the previous year

This change is not mandatory and, as an ISA manager, you can choose whether or not you want to request a new ISA application each subscription year or following a gap in subscriptions. Similarly, you can choose whether to require an ISA application to be completed with new terms before adopting this change, or to apply this change to your existing accounts.

The model application forms in the ISA manager guidance will be updated.

If the investor becomes non-UK resident and later returns to the UK, they should make a declaration to confirm they are again a UK resident, including their permanent UK address. It is not necessary for them to complete a full new ISA application for an existing account. However, this does not apply to Lifetime ISAs as the declaration contained within the application form has effect for each year in which the individual makes a subscription to the account. 

The permanent address is necessary for reporting purposes, and it is important to have investors current details. Information given in newsletter 9 regarding permanent address still applies. 

If a breach in the ISA rules is found for an ISA opened with a continuous application, the tax year in which the breach occurred must be voided. This means that all subscriptions and any gains in that tax year must be removed. Subscriptions made in earlier and later years are unaffected unless a breach occurred in other years.

1.4 Allow Long-Term Asset Funds (LTAFs) and other funds with extended redemption periods to be permitted investments in an innovative finance ISA

This change is not mandatory, and managers can choose which qualifying investments they offer. Funds that would qualify for a stocks and shares ISA but cannot be liquidated within 30 days, are eligible to be held in an innovative finance ISA, including LTAFs.

The underlying fund will need to follow the rules set out within the stocks and shares ISA guidance, except for the liquidity rules.

To qualify for the innovative finance ISA, the fund must be able to be liquidated within 31 to 185 days of the investor’s request.   

1.5 Allow partial transfers of current year ISA subscriptions between ISA managers 

This change is not mandatory, and you do not have to offer or accept a transfer in (partial or full). If ISA managers choose to offer partial transfers of current year subscriptions, this should be set out in the terms and conditions of the account.   

Where current year subscriptions are transferred in full, and previous year subscriptions remain with the transferring manager, that transfer should be treated as a full transfer.

There is no change to LISA and JISA transfers, where current year subscriptions may only be transferred in full. This also applies to cash ISAs that fall within the transitional arrangements set out at 1.1, where only a full transfer of current year subscriptions would be permitted.

Full transfers  

For reporting full transfers to HMRC the receiving manager will be responsible for reporting current year subscriptions. The transferring manager must provide details of current year subscriptions to the receiving manager and should exclude current year subscriptions from their returns.

Partial transfers 

For reporting partial transfers to HMRC the transferring manager will continue to report all subscriptions made to them in the current year. The receiving manager will include any current year subscriptions made to them in their returns. For example:

Ethel subscribes £5,000 to ISA manager A on 7 April 2024.

Ethel instructs a transfer of £3,000 from ISA manager A to ISA manager X on 13 June 2024 (no subscription information is provided by ISA manager A to ISA manager X).

Ethel subscribes £2,000 to ISA manager X on 14 June 2024.

ISA manager A reports £5,000 subscription to HMRC for tax year 2024 to 2025.

ISA manager X reports £2,000 subscription to HMRC for tax year 2024 to 2025.

Flexible ISA 

For reporting Flexible ISAs, the process for transfers is the same for full or partial transfers. The rules for Flexible ISAs are:

• any funds withdrawn, previous year, current year, or both, can only be returned to the same account — if the investor returns them to a different account, then they will count as a fresh subscription
• only funds replaced that take the subscription balance above £0 will count as a current year subscription
• the original manager should still provide the new manager with current year net subscriptions and date of first subscription where it is a full transfer

The transfer history forms requirements are unchanged. Model forms were revised and published in November and are available on the transfer page of ISA manager guidance.

1.6 ISA manager withdrawal of approval by HMRC 

HMRC can withdraw approval from an ISA manager, either in full or in part, if they have reason to believe that they are: 

• failing, or have failed to manage ISAs in accordance with the regulations
• not qualified to act as an ISA manager

In addition, as of 6 April 2024, if an approved account manager has failed to open any ISA accounts within 18 months of being approved as an ISA manager, then HMRC may withdraw approval. Withdrawal of approval in this manner does not prevent firms from re-applying to HMRC to become an ISA manager.

1.7 Funding the purchase of a first-time residential property with a Lifetime ISA

As of 6 April 2024, when purchasing a first-time residential property, using a LISA, the property purchase cannot be funded by a legal mortgage where the parties are related. The definitions of related persons are as set out in the rules in FCA PERG 14.4. 

1.8 Eligibility to apply for ISA manager status 

ISA and Child Trust Fund (CTF) products were designed to be compliant with EU law and provide equivalent application of the rules for citizens and financial institutions in EEA states. Currently, ISAs and CTFs may be managed by an authorised European Institution without a presence in the UK provided they appoint a UK based tax representative. 

At Spring Budget 2023, it was confirmed that ISA and CTF provider eligibility would be restricted to UK based managers and the upcoming Regulation changes incorporate this decision. 

1.9 Digitalisation of ISA reporting  

At Autumn Statement 2023, the government announced the digitalisation of the ISA reporting system.  

HMRC will work with ISA managers to deliver digitalisation together and we’re in process of creating a collaboration forum that will act as our key stakeholder engagement group. We expect the first meeting will take place in April and will issue invites shortly to ISA manager key contacts.

2. Spring Budget 2024

At Spring Budget 2024, the government announced the introduction of the UK ISA. The new £5,000 allowance, in addition to the existing ISA allowance, will provide a new tax-free savings opportunity for people to invest in the UK, while supporting UK companies.

We are consulting on the UK ISA and welcome views on how to design and implement the UK ISA. The UK ISA consultation will run from 6 March 2024 to 6 June 2024.

3. ISA manager contact details

To ensure HMRC can speak to the right people in firms, and that our contact details are up to date, we would appreciate if ISA managers could complete the ISA manager contact Information.

We will use the contact details provided for any HMRC policy, compliance, technical and digitalisation contacts, including tailored updates on the digitalisation of ISA reporting.

Information collected on nature of business and trade body membership will be used to inform categorisation and segmentation of ISA managers for our records.

4. Lifetime Individual Savings Account (LISA) bonus payments

4.1 LISA bonus claims

When submitting your LISA bonus claim, we would like to remind you to ensure that the figures that are being reported are correct before they are submitted.

This is particularly relevant where an investor makes more than one subscription per month. All new subscriptions being reported during the period should be included in the amount being reported in the total subscriptions year to date (YTD) field.

4.2 LISA bonus claim period

The Lifetime Individual Savings Account (LISA) bonus claim period runs from the 6th of the month to the 5th of the following month. Bonus claims can be submitted to us at any time, but the deadline for making a monthly bonus claim is the 20th day of the month following the end of the claim period. This 14 day period can also be used by the LISA manager make corrections, or deal with unsuccessful responses, to bonus claims.

The reporting period ends on the 20th day of each month and any payments to be made will not be visible before this date. Any transactions for the claim period which are received after that time will be processed the following month and deemed late.

4.3 LISA API

We’d like to make you aware that as we approach the end of the financial tax year, you may find that the API in the LISA system runs slower than usual. This is caused by LISA managers using the system more than usual to add new LISA accounts.

5. Child Trust Funds

If you have any updates to the Child Trust Fund provider list including change of details, notifications of bulk transfers, cessation requests or anything in relation to insolvency or administration, contact [email protected] and put ‘Child Trust Fund’ in the subject line.

If you have made or received any transfers that are not included on the published providers list email [email protected] with details of the transfer.