Martin Lewis has issued new guidance about ISAs to listeners on his podcast as he set out the rules in the UK for savers
Martin Lewis has shared some new advice on ISAs with his listeners(Image: ITV file image)
Martin Lewis has issued new advice on ISAs after being told about a ‘clever idea’. The money-saving expert was questioned about a ‘strategy’ a listener was contemplating to make the most of his ISA allowance.
Mr Lewis discovered the plan on the most recent episode of his Martin Lewis podcast. A listener called Martin asked Mr Lewis, who established the MoneySavingExpert website, if he could ‘settle an ISA question for me’ as he was struggling to get an answer.
The listener disclosed he had £20,000 in an ISA from a previous tax year and approximately £5,500 in this year’s ISA. He told Mr Lewis he likely wouldn’t be able to utilise all of the £20,000 annual allowance this year – but had been examining a ‘strategy’ instead.
Setting it out, he outlined he wanted to open a new ISA in the next tax year with £1 and do this again the year after. Then, when his pension lump sum became accessible in 2028, he planned to put £20,000 into each of those existing £1 ISAs using the relevant yearly tax allowance.
He concluded by saying: “I really appreciate your guidance as I am trying to plan well in advance and avoid making an expensive mistake.”
Mr Lewis, renowned for his ITV programme The Martin Lewis Money Show and for his money programme on BBC Radio 5, called it a “good idea” and a “clever idea”. But he was quick to get to the point, reports the Mirror.
He briefly explained that the listener would be unable to achieve this. He outlined that ISA regulations are highly specific on the amount of money that can be deposited within a tax year, and that the allowance cannot be carried forward.
He said that the only potential solution would involve stoozing, though this is complicated and carries risks. Mr Lewis said: “I’m afraid the straight answer is no. You can’t just open up an ISA with a £1 and then a couple of years later fill in what you haven’t put in. It’s all about what you put in in the tax year. I’m so sorry.”
What are ISAs and what are the rules around their use?
There are four types of Individual Savings Account (ISA): cash ISA, stocks and shares ISA, innovative finance ISA and a Lifetime ISA. The gov.uk website explains that you don’t pay tax on interest on cash held in an ISA or income or capital gains from investments in an ISA.
Should you complete a tax return, there is no requirement to declare any ISA interest, income or capital gains on it. The guidance clarifies that each tax year you can save up to £20,000 in a single account or spread the allowance across several accounts.
The tax year runs from 6 April to 5 April. You are permitted to pay into only one Lifetime ISA per tax year, with the maximum deposit capped at £4,000 in a tax year.
For further information on ISAs, visit gov.uk’s web page on the subject. To listen to the Martin Lewis podcast episode in full, go here.
