Everything you need to know about ISAs (Cash & Shares) - but were too afraid to ask!

Martin Lewis tells you everything you need to know about ISAs - the Cash, Stocks and Shares, Help-to-Buy, and Lifetime varieties – as well as what ISA changes in the budget means for you. Martin talks about the government consultation on replacing the Lifetime ISA and tells you if it’s still worth it. Plus, you tell us your cheap Christmas magic tips, Mastermind is all about car insurance renewal, and do you know where your stopcock is? If you want to ask Martin a question, you now can! His Question Time podcast lets you ask Martin absolutely anything and everything (within reason!) – so if you’ve always wanted to know his favourite font, what his go-to coffee order is, or have a very complicated question about your finances, email it to [email protected] mailto:[email protected].

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

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• 1:07Martin Lewis?

  An ISA isn't a product. An ISA is just a wrapper that protects you from tax.

• 1:15Martin Lewis?

  When you put money inside an ISA, it is tax-free. You can have as much as you like in there, but you can only put in £20,000 a year. If you don't know where your stopcock is, find your stopcock. Hello, I'm Martin Lewis and this is the cunningly named The Martin Lewis Podcast. I do wonder what that's going to be about. Now, usually, much of it comes from my BBC Radio 5 live show with Adrian Charles, but there's also bonus money-saving tips just for you lucky, lucky podcast listeners. In today's pod, it's an ISA spectacular. There were big changes to the ISA regime announced in the budget, and we have been swamped with questions ever since. So I'm going to cover everything you've ever wanted to know about ISAs but were afraid to ask. I'll take you through shares ISAs, cash ISAs, the tax gains, and how to make them sing for you.

• 1:59Martin Lewis?

  Plus, a special section on the future of the first-time buyer and retirement specialist ISA, the lifetime ISA, with a consultation due to replace it, is it still worthwhile? This week's tellers is all about how to add some magic this Christmas at no cost. The mastermind is about a little-known car insurance catch. And do you know where your stopcock is? Play the theme.

• 2:37Speaker 04

  Martin, if I was to go for lunch with you, who would pay? Would we split it? Or would you do the honourable thing and just pay for me?

• 2:44Martin Lewis?

  Is it a date, Adrian?

• 2:46Speaker 04

  It'd be a mandate, yeah.

• 2:49Martin Lewis?

  I think it depends on whether it was work, whether it was being charged to work expenses. It would also depend on who had asked who. Do I have vouchers? Vouchers are very important in that case.

• 3:01Speaker 04

  I would rather pay for myself than you fob me off with a voucher that you've got.

• 3:06Martin Lewis?

  No, vouchers are not fobbing anybody off. Why on earth, if you had a voucher to eat somewhere, I don't care, it could be a Michelin-starred restaurant with a voucher, why would you pay more automatically out of some display that you're paying more? But Adrian, I would be delighted to take you to lunch and to pay.

• 3:19Speaker 04

  Oh, lovely.

• 3:19Martin Lewis?

  And if I've got a voucher, I'm using it.

• 3:21Speaker 04

  I mean, are you saying that if you're out on a date day, and I know you wouldn't be because you're happily married, as am I, but if somebody's out on a date, I mean, is it acceptable to say, "I'll get it", and then pull a voucher out? Or do you go and sneak up to the waiter and go, "Can you do us a favour? I'm paying for this but with a voucher"?

• 3:38Martin Lewis?

  I've done a lot of polls on exactly that question over the years. And what's very interesting is some people don't like the voucher idea, but many people came up the opposite and said that if, and it was women who were saying this, "If a man had asked me out and he said he would pay and he used a voucher, I would see that as a good sign. It was a sign in many cases, not everybody thinks this, this is somebody who's, you know, fiscally competent and trying to look after their money and therefore solvent."

• 4:03Speaker 04

  But it also surely implies that if he didn't have a voucher, that he wouldn't be paying.

• 4:07Martin Lewis?

  Well, not necessarily. We don't know, it could be a 20% off voucher. They're still paying, aren't they? But I have no issue with the voucher. I think how it's done is really important. But I mean, people should let them know. Is there anybody listening out there who has paid with a voucher on a first date? And if you did, how did you do it? Did you do it quietly and just hand the voucher over? Or did you say, "I've got a voucher, this is fantastic. I'd like to know the voucher etiquette. It's been a long time since I was on a date, Adrian."

• 4:35Speaker 04

  Okay.

• 4:35Martin Lewis?

  You know, early noughties, early noughties.

• 4:37Speaker 04

  Early noughties and very naughty.

• 4:39Martin Lewis?

  And I've not been naughty since.

• 4:41Speaker 04

  Yeah, beat me to it.

• 4:44Speaker 04

  Sometimes I get instructions to ask you about something odd and I can normally work out what it is you're gonna say.

• 4:50Martin Lewis?

  Stop cock.

• 4:51Speaker 04

  Yeah, but when I'm told you wanna talk about stop cocks, I cannot imagine where you're going with this. Have you had a flood?

• 4:57Martin Lewis?

  No, but many people do and the average cost of a flood is nine thousand pounds. This is a very, very short piece, but it's a bit of that annual housekeeping that I like to do. People don't realise the huge cost of flood damage. Frozen pipes, got a leak afterwards, can be nine thousand pounds on average. And the most important thing that you need to do if you're gonna be in that situation is to turn your mains water off, which is known as turning off the stop cock. And that's why we're talking about it. But here we go. There are, will be lots of people listening out there who do not know where their stop cock is. So my little bit of homework today is very simple. If you don't know where your stop cock is, find your stop cock. That's it.

• 5:40Martin Lewis?

  I mean, it's common that under the kitchen sink, you might find it in a cupboard near the bathroom. Some people have outdoors ones that are at the front of your house. But it's a very just simple piece of homework from me today for everybody. If you don't know where your stop cock is, then by the end of today, locate your stop cock so just in case you would have a burst pipe and needed to turn the water off quickly, you could turn it off quickly. And also just make sure it's mobile and moving and hasn't rusted up so you can't do it. It's just a bit of preventative, preventative care for people's households. Do you know where your stop cock is?

• 6:14Speaker 04

  I know everything, but I just can't remember it. I do know it, it's in there somewhere, but I can't retrieve that bit of information.

• 6:21Martin Lewis?

  But you think if your pipes burst and you needed, you would suddenly, that instinctive memory would come?

• 6:25Speaker 04

  No, no, it would go completely at the moment. It'll come to me, it'll come to me when I don't need that information, but four in the morning or something, when there's no flood and I might not even be at home.

• 6:34Martin Lewis?

  Then maybe you should, should go and find your stop cock today and write yourself a little note in a very obvious place that tells you where it is in case you need it.

• 6:41Speaker 04

  Okay, fine.

• 6:42Martin Lewis?

  So do you know where your stop cock is? And do you, more importantly, are the people listening out there who don't?

• 6:47Speaker 04

  Where's the oddest place anyone's found a stop cock?

• 6:53Speaker 04

  So where do we start? A couple of weeks ago, there were these big changes announced to ISAs. We're going to run through the ISA basics, then look at cash ISAs, shares ISAs, and the lifetime ISA, where there are three, there are big changes coming too. So where do you want to start? We had a question from Ruth.

• 7:10Martin Lewis?

  Yep.

• 7:10Speaker 04

  That's a good place, good a place as any.

• 7:12Martin Lewis?

  Always.

• 7:13Speaker 04

  Could you give me an idiot's guide to them? I get so confused by all the jargon when I look at them myself. Can't decide if one is better than the other.

• 7:20Martin Lewis?

  Okay. So what is always important here is to go back to basics on what an ISA is and what an ISA isn't. An ISA is not a product. I cannot tell you how many times people ask me, should I open a savings account or a cash ISA? Well, a cash ISA is a type of savings account. They're not either or. I got asked on my show the other day, should I go to an investment platform or use a shares ISA? Well, shares ISAs are on investment platforms. It's not an either or thing because an ISA isn't a product. An ISA is a tax wrapper. That's the phrase, a wrapper. Something you wrap around whatever you're saving or investing in order that you don't pay tax on it. So I will go back to my, not strictly patented, but it is in my head analogy that I always use on this. And this is the way to start thinking about it.

• 8:05Martin Lewis?

  You have a chunk of cake. It might be a cash cake, which is chocolate because it begins with a C. It might be a shares cake, strawberries, begins with an S. You know, we've got one cake, you've got two cakes. Now, the problem with cake normally is you cut a slice out before you eat it. Here comes HMRC, here comes the tax office and

• 8:25Martin Lewis?

  they take a bite out of your interest that you've earned on savings or out of your growth on shares investing, and they take a bite out of it. And you don't want that. So what is an ISA? An ISA is cling film. All an ISA is, is a piece of cling film. You can put up to £20,000 a year of shares or cash inside the cling film, your savings account or your investment account, inside the cling film. You wrap the cling film around it. And now, when you've got your interest or you've got your growth, the HMRC come up. They can no longer bite it because it's inside the ISA wrapper. An ISA is simply a wrapper that protects your savings or your investment from tax. You can choose whether you do it in cash or in shares.

• 9:09Martin Lewis?

  We'll come on to that choice a little bit later on, but that's all it is. It's nothing clever. So people say to me, oh, oh, I don't know. I don't want to put my money in the cash ISA because, you know, I don't want to lock it away. There's no lock away rule in the cash ISA. You've got easy access cash ISAs, just like you've got easy access savings account. You've got fixed rate cash ISAs, just like you've got fixed savings accounts. In shares, you can have a choice of funds right across the market in a cash ISA, just like you can in an investment platform. Or you could pick individual shares in the shares ISA, just like you can in an investment platform. An ISA is just a wrapper that protects you from tax. Nothing more clever about it.

• 9:44Speaker 04

  We'll get on to this, I know. I suppose the jargon comes as like different kind of shares ISAs, where then that's as bewildering as any kind of. It can be as bewildering, the jargon concern there is in any kind of investment in shares.

• 9:57Martin Lewis?

  Yes, but your last bit is the most important bit.

• 10:00Speaker 04

  Yeah.

• 10:01Martin Lewis?

  Right? When people say, should I get a cash ISA or a shares ISA? That's an irrelevant question. The question is, should I be saving or investing? The fact you're putting it in an ISA is just a tax treatment. The fact that there are complexities inside a shares ISA is not about the ISA. It's because there are complexities in investing. And that's the biggest point I want to make. The ISA in itself isn't complex. It just means you don't pay tax and we'll come along to what taxes you don't pay later on. I think you've got loads of questions on the basics, haven't you? Let's do those.

• 10:27Speaker 04

  Yes. Claudio Santos, what happens at the end of the 12 months in a fixed rate ISA? And a shares and shares and stocks ISA? How long can you have them?

• 10:36Martin Lewis?

  Okay. So the most important thing to understand here is when you put money inside an ISA, it is tax free and it remains tax free until it is no longer inside the ISA wrapper. So you're talking about a fixed rate cash ISA, a fixed rate savings account for a year. After the year, what would happen on the fixed rate savings account? It would mature and they will generally mature it into an easy access cash ISA, probably paying a pants rate. And so you'd want to transfer it to a different ISA provider to earn more interest. But the point is it's still in the ISA wrapper. It's still tax free and there's no time limit on ISAs. The reason people think there is, is you get £20,000 per tax year. So there is a time limit to use each year's £20,000 allowance.

• 11:22Martin Lewis?

  Right, you've got to get it in before the 6th of April each year, but once it's in, it remains tax-free year after year. Same is true in a shares ISA. Now, I just need to be really clear. When I say it's tax-free in an ISA, I don't want people to get the impression that if you were to take it out of the ISA, suddenly you pay a load of tax. It doesn't work like that. It's just, it's tax-free in the ISA. If you take it out, it becomes normal savings. So, let's make this really simple, because I'll use savings as a simple example. You've got £10,000 in the cash ISA, you've earned £2,000 of interest, you've now got £12,000 in the cash ISA, having it had six or seven years. You take it out of the cash ISA, you've got £12,000. There's no other tax to pay. But if you then put it in a normal savings account, well, the interest on the normal savings account would be taxable. That's all I'm saying.

• 12:05Speaker 04

  And just to be, it just might be helpful to run those exact numbers if you didn't have it in an ISA. So, you've got £10,000.

• 12:12Martin Lewis?

  Well, let's do that when we get to cash ISAs. Forgive me, I've structured it later.

• 12:16Speaker 04

  I'm sorry, I'm getting ahead of myself.

• 12:18Martin Lewis?

  Because, because that's all about what your other tax situation is when we get there. But the key thing then to understand, and where we have to build up, is what that means is, you could have put £20,000 in a cash ISA five years ago, £20,000 in four years ago, £20,000 in three years ago, £20,000 in two years ago, and £20,000 in this year. Same in a shares ISA. So, you therefore could easily have £100,000 in cash ISAs, probably with interest on top, so it would be a more, £110,000, £120,000. You could have £100,000 in shares ISAs, hopefully with growth on top. It might be £200,000, £300,000 in the shares ISA now. And all of that is inside the wrapper. Your interest is inside the wrapper. Your growth of your shares is inside the wrapper. The only limits,

• 13:03Martin Lewis?

  and people get so confused, is the amount you can put in. You can have as much as you like in there, but you can only put in £20,000 a year. Now, let's be really, let's go to the extreme. You put £20,000 in a shares ISA, you happen to have invested in a single share that by fortune has grown by 1,000 times. So, you now have £20 million in a shares ISA. All of that is still tax-free, because it's all still in the Shares ISA wrapper and unless you take it out and when you took it out, there wouldn't be any capital gains tax to pay, there wouldn't be anything. But from that moment on, once it's outside, anything you did with the twenty million pounds you now have would be taxable. But taking it out doesn't make it taxable. Does that help really make it?

• 13:48Speaker 04

  Yeah.

• 13:48Martin Lewis?

  You know, does every, once it's in, it's in. It's only the rule is going in.

• 13:52Speaker 04

  Okay, I mean, you sort of kind of covered this, but Martin Sanlam said, my understanding can only have one ISA of twenty K. Is that correct?

• 13:59Martin Lewis?

  No, that's not correct. So the rules are now you can have multiple ISAs. You could have five different cash ISAs in a year. You could just only put in twenty thousand pounds in total into cash ISAs in a tax year. Now, many people have more than one cash ISA, for example, same as shares ISAs. They might have one they set up this year, one they set up last year, one they set up the year before. Often with cash, it's easier to consolidate all into one because then it's easy to move from one to another and you do that by transferring. Transferring simply means you you don't take the money out, you open up a new ISA and you'll have a transfer form on that and it'll ask you what your old ISAs are and it will move them all into the new one. That's the transfer process. But yeah, you can have, these days you can have multiple ISAs.

• 14:42Martin Lewis?

  The rules changed on that, that you couldn't, you can now open multiple ISAs in a, in a year. And why would that be important? Well, if you were savings and you wanted some in easy access and some in a fixed cash ISA, you could have an easy access cash ISA with five grand in and a fixed ISA with five grand in. And then you could also put ten grand in the shares ISA. So that you have that flexibility, it's just a wrapper and you could put up to twenty grand a year in it.

• 15:05Speaker 04

  Okay, so I know this question gets on your nerves, but should you go for a cash ISA or a shares ISA? A question you've already described as, well, it misses the point, doesn't it?

• 15:15Martin Lewis?

  Well, it it does to an extent, but let's answer the actual question, which is should I go for savings or should I invest? Right, now, the first thing is, the the first thing you do with your money is you pay off expensive debts. After that, it's always worth having a savings emergency fund, so three to six months' worth of bills. Money put aside in case of an emergency that's liquid, that's easy to access. When you should be investing is generally if you're looking to put money away for more than five years and it's money that you don't need to access instantly and it's long-term savings, then let me be plain, on the balance of probabilities, investing will likely substantially outperform savings. Now, you have to look at your risk profile, but if we suggest you're

• 15:55Martin Lewis?

  taking a broad spread of risk, you know, a number of collective funds in a few different indices that gives you a broad spread of shares and bonds across hundreds or thousands of different products, then on the balance of probability, that will generally outperform savings. So people should be looking at that spare money, should be looking at investing. But where the cash ISA versus shares ISA comes in, is let's suggest you have both savings and you have investing. Well, then, the issue between the two is which is more powerful to use my ISA for? And the general answer, I think, would probably be shares, because

• 16:36Martin Lewis?

  you're putting money into shares, into investing, in the hope that it will grow more quickly. So if it goes well, your profit will be bigger. And if the profit is bigger, then generally, the tax on that profit will be bigger, so you want to protect it. Plus, and we'll come on to the specifics later, but you get an allowance of how much you can earn each year in interest from savings, on top of your normal tax allowance, and you get an allowance of how much capital gains you can have each year. But savings interest tends to be paid yearly, capital gains, the profit on selling shares, is paid and crystallises in the year that you sell. So if you buy an investment 10 years ago, you hold on to it, and you sell it 10 years later, all the gain is in that one year that you sell it, rather than

• 17:20Martin Lewis?

  it being spread of an allowance year after year after year after year. And there are ways to work it so that you can do that. So generally, if you have both, most people would tend to go for a shares ISA, especially if they were using up the capital gains tax allowance. And we'll come on more on to all of that a bit later. Does that help?

• 17:37Speaker 04

  It does help. There were big changes in the budget to ISAs.

• 17:42Martin Lewis?

  Yeah.

• 17:42Speaker 04

  Do you want to run us through them?

• 17:44Martin Lewis?

  Well, the very big change is starting in 2027. From April 2027, the cash ISA limit will be cut to £12,000 per tax year for those aged under 65. I'm afraid we don't yet know the specifics of the definition of age 65. And you might think it's pretty easy. Well, I don't yet know if it is for somebody who is already 65 at the start of the 2020, April 2027 tax year, or that as soon as if you were to be 65, three months after the start of the tax year, suddenly you would get your £20,000 allowance. That just hasn't been specified yet, so we don't know. But basically, the rule is if you are under the age of 65, you will only get £12,000 you can put in a cash ISA.

• 18:28Martin Lewis?

  Now, the general ISA limit will stay at £20,000. Let's go back to our cake. Let's think about it. You will be able to put up to £12,000 in a cash ISA. And anything you don't put in a cash ISA, you could put in a shares ISA. So if you maxed your cash ISA out at £12,000, you could put £8,000 into a shares ISA. You could also just put £12,000 in a cash ISA. You wouldn't have to use your shares ISA. You could just put £20,000 in the shares ISA or £5,000 in the shares ISA and not use your cash ISA. The limit is 20,000 in total in ISAs, but cash ISAs specifically will be capped at £12,000 for those aged under 65.

• 19:09Martin Lewis?

  And this is because the government wants to encourage younger people to invest rather than save, because they rightly believe that in the long run, that will, on balance of probabilities, be more lucrative for them. I think it's the wrong method, as I've discussed on the podcast before. I think we should be educating people about investing. We should be providing better guidance, and there are some changes happening to that on investing. And I think we should be providing better incentives for young people to invest rather than cutting the cash ISA limit. But hey, I'm not Chancellor, and that's what she has decided to do.

• 19:43Speaker 04

  Okay, a question from Andrew Glennon. It'd be good to let people know that although the cash ISA level reduced from under 65s, you can still invest in low-risk stocks and share funds that are linked to cash sterling and bonds.

• 19:56Martin Lewis?

  Well, you can. I mean, you could have a relatively low-risk corporate bond funds, or you could go for a money market fund and you could put all those into shares. But they are a different asset category. They are still investing. And so you are right, but that's the type of thing. And I'm trying to make sure I get the message out there that I think we do under-invest in this country. And I probably haven't talked about it enough over the years because it's outside my expertise. But I think I'm trying to twist that balance a little bit, to make sure people understand that investing is good for them. I invest personally, and I think it's important to do so. But it is something that'll make people nervous, and the choice is not as straightforward, and it's not as straightforward as having a standard interest rate. But you're right. I mean, for me, the issue isn't people who

• 20:38Martin Lewis?

  want money in cash should be trying to find cash equivalents in shares investing, and shares ISAs. It's actually a lot of people, there are a lot of people who hold far too much money in cash, and they should be in general investing, not just trying to find cash equivalent investing.

• 20:51Speaker 04

  Okay. I have other questions, but I keep thinking I'll get a sort of very passive-aggressive telling off from you if I stray.

• 20:59Martin Lewis?

  No, Adrian, ask.

• 21:00Speaker 04

  Okay. I've forgotten what it was. Oh, yeah. So you've got shares with a shares ISA. Is there any way of establishing, I know the answer's no, but is it a low-risk shares ISA or a high risk?

• 21:11Martin Lewis?

  I mean, the problem is, Adrian, you're starting to get me into regulated areas that I'm struggling to talk about. Look, I mean, there are some brilliant investment sites out there. Boring Money is very good. Triple I is very good, that people can do their reading. I mean, and, you know, what is one person's low risk is another person's high risk. Clearly, an independent financial advisor would be very helpful if people want to learn where to invest. But the general truth of it, I had someone on my show the other day, on my telly show, you know, and they were saying you need £50,000 to £70,000 before it's worthwhile, because the fees that we cost mean it's not worthwhile on amounts smaller than that, which is why people do DIY investing. Lots of people invest in passive funds. So, you know, you go and get an exchange-traded fund.

• 21:52Martin Lewis?

  That tracks the S and P 500 or the FTSE 250, S and P 500 is the 500 biggest shares in America. And it tries to match their, the performance of those on balance. Or the FTSE 250, the 250 shares in the UK, the big, big domestic-ish operator firms. Or, or a global tracker. And those are the type of things and you drip feed your money in so that you're spreading it across. These are the type of things that people should be reading about. But I can't give you the definitive answers, it's regulated. And to be honest, the whole, the, the fact that I'm clenching my buttocks here for a second, even though I'd like to answer a bit more. Is something that I've said to the government, I, I, you know. I, I did my investment program on the telly the other day.

• 22:35Martin Lewis?

  I think it was pretty good. I've had a lot of good feedback. I've also had lots of people who say, how dare you encourage people to gamble. And other people who say, you're responsible for this, you should have done it 13 years ago. Not sure anyone quite realizes the regulatory push it took. You know, both Ofcom and FCA rules to try and get something like that on the show. But it shouldn't be that difficult to talk about investing, but many people are scared of it because the regulations are so tight. And, and I've said to the Chancellor and to the Economic Secretary to the Treasury, look, if you want people to talk about investing more. Then you have to allow them to talk about investing more at the moment. It's so wrapped up in red tape and warnings. That, you know, in a way that there's no regulation to warn that a cash ISA might underperform inflation. That it actually makes it very difficult and it makes it difficult for me and it's one of the reasons I've swerved it.

• 23:19Martin Lewis?

  To an extent, and also the fact that I'm not a regulated investment advisor and it's not my specialist subject. Anyway, that was a big answer to, to your question, but there we go.

• 23:26Speaker 04

  Okay, there, Ben Thompson says, there seemed to be some talk about taxing money held as cash. Within a shares ISA, do you know how this is going to work yet? I mean, like the poor, who was it? Right, Ruth at the beginning says, I get confused by the jargon. I mean, conceptually. You can see, it's not easy, is it? A cash, you know, it's just confusing. Money held as cash within a shares ISA. I mean, I do, I think know what it means, but I get why you get confused.

• 23:53Martin Lewis?

  Yeah, but you don't, but that's a complicated question. People don't need to confuse. A cash ISA is a savings account you don't pay tax on. A shares ISA is an investment account you don't pay tax on. That's a simple answer. The answer to this question is, the government is trying to get people to hold money in shares more than in cash, so it has cut the cash ISA limit, and it has done a couple of things, of which this is one, to stop people effectively using a shares ISA as a cash ISA. When you have an investment platform, you tend to do it by depositing cash in there and then investing that cash. So they have access to facilities that pay cash, and some of them pay interest. So what some people do is they simply hold cash inside a shares ISA, and it's tax-free, like a cash ISA is. The government has said

• 24:36Martin Lewis?

  to prevent that, they are going to add a tax charge onto cash held inside shares ISAs for under 65 from 2027. It is unspecified how that tax charge will work. And you know, there are some dangers here, because if you want to take your money out of the markets for a certain period to invest in something else, and you're going to hold it for six weeks, it seems pretty unfair that you would have a tax charge. If you are doing it to gemme the system, and you're effectively going to use your extra £8,000 allowance that you get on shares to hold cash in a shares ISA, that's what the government's trying to stop. So my suspicion is there will be a consultation on exactly how they do it, and how long you have to be holding cash for it to be taxed, and what the tax will

• 25:19Martin Lewis?

  be. But we're not there yet, we just don't know the rules to that yet.

• 25:23Speaker 04

  Okay. Pete Hawkins. Until now, we had the freedom to transfer money between cash and stocks and shares ISAs in either direction. From 2027, we can't move from stocks and shares to cash to avoid a loophole on the cash 12K limit, which is what we've been talking about. Will this restriction apply to money already in stocks and shares ISAs? Limiting my options to de-risk to cash, or will it only apply to money put in after 2027?

• 25:52Martin Lewis?

  So that is all quite correct. This is the other loophole they're trying to crack down on. So at the moment, you can simply move money to a shares ISA. So what people were thinking, if they wanted a cash ISA in 2027 with all 20 grand in, is they'd put 20 grand in the shares ISA, then the next day transfer it into a cash ISA. The government has thought of that, and they're using, you know, quite a serious hammer to try and stop that happening, in that they are going to stop anyone transferring money from a shares ISA to a cash ISA. And it's any money, it's not just money put in from 2027 onwards. From the 6th of April 2027, as far as we know, and give me some wriggle room because the full guidance is not published. We just don't know what they're doing. But as far as we know, if you have money in a shares ISA, you will not, and you're under 65,

• 26:37Martin Lewis?

  you will not be able to transfer any of it, even if it's from past years into a cash ISA. So if you wanted to do that, and there could be many reasons for doing that. You want to, you're going to buy a house in the next few months and you want to liquidate the asset. So you're not at risk, then you need to do it by the 5th of April 2027.

• 26:58Speaker 04

  Okay, Tyler Jane Nicholson says, can I transfer my fixed rate cash ISA to a stocks and shares ISA with another provider? If so, should I wait until the end of the fixed rate term or transfer now? I'm receiving my interest monthly into my cash ISA. Current rate is 4.12% until the end of May. Thank you. You're welcome, Tyler.

• 27:20Martin Lewis?

  Well, I can't tell you whether you should move from a cash asset into an investment asset. That's always going to be your choice. But if we talk about the practicalities of doing it, if you were to choose to do it, then fixed rate cash ISAs often have early exit penalties in which you will give up 90, 180 or 365 days' worth of interest if you take money out, either by transferring or withdrawing before the end of the fix. So that is the most important thing that you check. And then you have to factor that into your equation. How big is the penalty? How much, how important is it to you? You get the money into the different type of assets this quickly. So you can do it, but there could potentially be quite a sizable interest penalty for doing so.

• 28:05Speaker 04

  The key to ISAs is that you save tax.

• 28:07Martin Lewis?

  Correct.

• 28:08Speaker 04

  So starting with a stocks and shares ISA, what tax do they save you?

• 28:13Martin Lewis?

  Okay, there are three taxes on investing. The first one is capital gains tax on profits. Now, that is simply when you sell something that has increased in value. So if you buy a fund for £10,000 and you sell it five years later for £20,000, if you're lucky and it's gone up that much, then you have made £10,000 profit and that £10,000 is subject to capital gains tax. Now, there is an annual exempt allowance of £3,000 per person per year.

• 28:40Martin Lewis?

  So you can make up to £3,000 of gains per year. But remember what we discussed, that the issue with selling investments is you might have held them for 10 years, but all the gain still crystallises in one tax year. It's not spread across the 10 years, if you see what I mean. Above the annual exempt allowance, basic rate taxpayers, so those who pay 20% tax on their earnings, pay 18% on capital gains, and higher and top rate taxpayers pay 24% on capital gains. There's also dividend tax, because when you invest, some shares and funds pay you a dividend, and that's income that you get each year. So it's not the capital growth, it's not the growth in the value of the share that you've bought. There's a dividend allowance of £500 per person per tax year.

• 29:22Martin Lewis?

  That's on top of your normal personal allowance, the normal £12,570 a year most people can earn tax-free each year. If you earn more than that, then the tax rates are lower on dividends and other forms of income, that 8.75% for a basic rate taxpayer, 33.75% for a high rate taxpayer, 39.35% for a top rate taxpayer. But the basic and higher rate ones are going up by two percentage points next April. And then there's also tax on savings, because things like bonds or gilts, which are UK government bonds, they pay interest and they're taxed like savings. But any of that inside a cash, inside a shares ISA, you don't pay tax on. So, well, let's just go back to that capital gains tax allowance.

• 30:05Martin Lewis?

  I said you make £3,000 per person per year, that's outside of an ISA. So if you sold shares within an ISA, there's no capital gains and it doesn't use up that £3,000. So you still have another £3,000 of gains you could make outside of an ISA, on top of any gains you've made inside of the share ISA. Did that make sense, Adrian?

• 30:26Speaker 04

  That made sense, it did. Abdul Kadiyoh Rahim, if I put money in a shares ISA, can I control which shares it is invested in? In the shares ISA, can money go down as well as up with share prices? Well, I would have thought so.

• 30:41Martin Lewis?

  Yeah, I mean, you are, a shares ISA is just a tax wrapper. Investments can go down as well as up and have all the same risk as all types of normal investments, you know, and. The more you go for a specific, you buy one share, that's very, very high risk. You buy a fund of a hundred shares, that minimises the risk. You buy mixes of shares and bonds, that's probably minimising the risk more. But when you minimise risk, you minimise the potential upside as well as minimising the potential downside. So this is all about establishing your own attitude to risks and I would suggest that people go and do reading on that. But shares ISAs, yeah, depending who you choose, I mean, you might choose a robo-investor that simply picks your investments for you, so you don't have a choice. Or you might choose a typical investment provider where you just pick a fund and it tells you what funds to go in.

• 31:24Martin Lewis?

  Or you might go and go onto one of the platforms where you can literally choose from tens of thousands of funds and shares and totally choose what you put in your shares ISA yourself. Because as I've said earlier, a shares ISA is just a way of investing inside a tax wrapper. The normal investment choices are still available within a shares ISA.

• 31:44Speaker 04

  Okay, Avril Thurston, where's a good place to find a reputable beginner's guide to setting up your own DIY stocks and shares ISA, including the key things to look at when deciding on funds? DIY stocks and shares ISA, we've got to define that, haven't we?

• 32:00Martin Lewis?

  No, I mean DIY just means that you're going to pick the stocks and shares yourself, or more likely for a beginner, you'll be talking about picking funds. I mean, and let me be really plain, if you are a beginner investor, you're picking individual shares, that is a very high risk game. What you're probably doing is picking funds, and these days people tend to go for passive funds. So an active fund is one where you're in, but there's a fund manager who is paid, so the charges tend to be higher, to pick funds for you to try and beat the markets, whereas a passive fund is one that is tends to be computer driven to try and just match the performance of an indices. So a classic index is the FTSE 100, that's the 100 biggest UK shares, or the S and P 500, that's 500 big shares in America, or a global tracker.

• 32:45Martin Lewis?

  And people tend, as a beginner, they buy a combination of index trackers which have very low charges. So you're going to get back similar returns to the market. You would look at whether you want to, whether you need access to the cash or you can reinvest the dividends that compound. Because then if you get any dividends each year, so that means that's where you get an income payment and you reinvest it, that reinvestment then buys more shares and it sort of compounds because then you get dividends on the extra shares that you've got. So I mentioned earlier boring money and triple I, I haven't looked at Rebel Finance that people are telling me is great on YouTube. I'm not vouching for it because I haven't looked at it, but lots of people have been saying that's very good as well. And it's one of the things on my list to check out. So I'll give them a name check, but I can't validate them at the moment. I haven't had the time to go and have a proper look.

• 33:30Speaker 04

  James Starbuck, do you think he might be in the Starbucks family himself?

• 33:34Martin Lewis?

  Or, or was he in Battlestar Galactica? Wasn't that Starbuck as well?

• 33:39Speaker 04

  I've not, I haven't watched any of those films. I've never seen Star Trek, Star Wars, Battlestar Galactica.

• 33:45Martin Lewis?

  Or Buck Rogers, biddy, biddy, biddy.

• 33:46Speaker 04

  No, or any, anyway, how much, James says, how much flexibility do you have in selecting and changing the investments in stocks and shares during the time you hold the ISA? Is it effectively the same as with investments outside of an ISA?

• 33:59Martin Lewis?

  Yes, exactly the same, depending on the platform you choose, exactly the same within an ISA. I mean, if you chose to, you could buy a fund one day, sell it the next day, buy another fund, sell it the next day, and it all stays within the ISA wrapper. An ISA is just a wrapper, just a tax wrapper. It doesn't change the innate what you're investing.

• 34:15Speaker 04

  Do you know, we were at a text console, so all the texts that are sent in, and for taste reasons, the, any, any lewd word is asterisked out. So, and it's a

• 34:31Martin Lewis?

  Someone from Scum Thorpe?

• 34:32Speaker 04

  No, no, no, I wouldn't go there if I was you, but I'm afraid we would, Stopcock is not passing the test.

• 34:38Martin Lewis?

  Oh, no.

• 34:39Speaker 04

  It's just stop.

• 34:40Martin Lewis?

  Do you know, we used to, in, in my weekly email years ago, we, the spam checkers would never let us have Stopcock for exactly the same reason. So I always used to write it and it always made me laugh. I'd call it a stop mail chicken.

• 34:51Speaker 04

  Yeah, and why not?

• 34:55Speaker 04

  He says, hi Adrian, every water meter has a stopcock next to it. So all those people with a water meter just need to look there. Cheers, says Alan. Is that true?

• 35:04Martin Lewis?

  I'm going to believe Alan. I'd certainly say there's a level of common sense. It might be an outdoor water meter that you can go and switch it. There might be an indoor one as well. So just check which is more convenient for you.

• 35:13Speaker 04

  Okay. Now then, where were we? Shall we move?

• 35:19Martin Lewis?

  Move to cash ISAs, I think.

• 35:20Speaker 04

  Cash ISAs, yes. What tax do they save you?

• 35:24Martin Lewis?

  Okay, so when you, savings aren't taxed, but the interest on savings is taxed. But one of the things to remember about savings, you actually have quite a lot of allowances even before we get to ISAs. So you've got your personal allowance, the £12,570 a year. Most people can earn from any source, whether it's from work or from savings interest or rent on a property that you've got tax free. Then above that for savers, if you have limited earnings, so limited work earnings, and you earn under £18,570, there's a thing called the starting rate of savings, where you could potentially get up to another £5,000 of interest from savings tax free.

• 36:05Martin Lewis?

  For those who earn more than that, there's the £1,000 a year personal savings allowance, which is the amount of money you can earn from any form of interest each year without paying tax on it. If you're a higher rate taxpayer, that's £500. If you're a top 45% rate taxpayer earning over £125,000, you don't get one of those. So you've got all of those allowances. Now, the important thing to understand about cash ISAs is not only is your interest not taxable, it's tax free, any money in a tax, but it doesn't count towards those allowances. So to make it simple, when I say you can put £1,000 in the personal savings allowance, you can have £1,000 of interest because of the personal savings allowance each year. That's on top of any interest in an ISA.

• 36:49Martin Lewis?

  Interest in an ISA simply is not taxable. It doesn't count to any of those limits. So it's a sort of bonus additional extra. Premium bonds, which you can have £50,000 in, work in a similar way. So the tax you're saving in an ISA is, in a cash ISA, is for those people who would otherwise be paying tax on their savings. So that would tend to mean you're earning as a basic rate taxpayer over £1,000 of interest a year. Top savings accounts 4.5% at the moment, so you probably need, what, 22 grand in that for it to work? So the cash ISA is saving you tax if you've already earning quite a bit of interest elsewhere.

• 37:24Speaker 04

  Okay, I've got a text from Simon the meter reader here. Alan is correct. Stop mail chicken is at the water meter.

• 37:33Martin Lewis?

  Nice. So there we go. Anyone who's got a water meter, we've got confirmation. That will be one of, that will be a place to find your stop cock. But if you don't have a water meter, which many people still don't, and certainly not in Scotland and Northern Ireland, where they tend to be less common, then you might want to be looking somewhere else too.

• 37:50Speaker 04

  If a working person has £12,000 cash to spare and save in a cash ISA every year, then what would be the total value in five and 10 years respectively, assuming a constant 4% tax-free interest rate?

• 38:07Martin Lewis?

  Am I doing a MSA level?

• 38:08Speaker 04

  Yeah.

• 38:09Martin Lewis?

  This is your mastermind, is it? So go on and go. They're putting £12,000 in a cash ISA each year, a 4% interest. And you want to know for five or 10 years, and I haven't, well, I could go on my phone on the calculator, but it wouldn't be good radio. Let me try and do it off the top of my head then. Okay, so after five years with £12,000, you'd have a total of £60,000 saved. Your interest rate is 4%, but you wouldn't have had the 60 grand in for five years. So we'll take an average balance of £30,000. So your average balance was £30,000, 4% interest on £30,000 would be £1,200 a year. £1,200 over five years means £6,000 of interest, but there would be compounding too. So just, I'm going to add another grand on top. My guess would be,

• 38:51Martin Lewis?

  if you did that, if you put 12 grand in a year, then you would have £67,000 in roughly, after five years and after 10 years, then it'd be 60,000 and it'd be 2,400 a year.

• 39:02Speaker 04

  Okay, so you'd 7,500 up then.

• 39:05Martin Lewis?

  And then you're going to be about, I think you're going to be somewhere around 30 grand up after 10 years. So you'd have 67,000 after five years and 150,000 ish after 10 years. If there's anyone who out there who wants to work that out for me properly, using, you know, proper compound interest and to the power of, to work out what it would be. And let's see how close it was. So I'm saying 67,000 after five years and 150,000 ish after 10 years. I'm sure someone will do that on there, sitting on the computer and sort that out for us. But I've got a radio show and a podcast to do. By the magic of podcasts, just as we finish recording, my brilliant researcher Rosie has done those numbers for me. And she says, having done it properly on a spreadsheet,

• 39:46Martin Lewis?

  that if you invested £12,000 at the start of each tax year for five years at a 4% interest rate, I'd estimated you'd have a total of £67,000. Well, she's telling me the exact answer is £67,596. And if you did it over 10 years, then I'd estimated £150,000. And I apologize for being so far out because the actual answer was £149,836. Do you know what? I'm taking both those as a win. Let's carry on with the pod.

• 40:17Speaker 04

  Okay. How does the process of transferring work? Do offered rates include transfers? And we need to leave a bit of time for tell us here because some of them are really good.

• 40:25Martin Lewis?

  So how does transferring work? You open up a new ISA and you don't have to put any more money in it. And you simply say, here are my old ISAs, please move the money across. And very importantly, that does not use up your £20,000 limit. And there is no time period. There's no, you have to do it in the tax year. You can transfer an ISA at any time, and it isn't using up your £20,000. As for the rates, I think, presume that means it's a cash ISA question. Well, on cash ISAs, many of the top rates either don't allow transfers or don't give the newbie ISAs to transfers. From the top of my head, the top paying easy access cash ISAs that allows transfers is Charter Savings Bank at 4.16% at the moment.

• 41:10Martin Lewis?

  The top paying for new cash ISAs is easy access is Trading 212 at 4.52%. But you don't get that rate if you're transferring across.

• 41:21Speaker 04

  Do you want to do a tell us?

• 41:22Martin Lewis?

  Yeah. I wanted to know your people's cheap or no cost ways of having just a little bit of Christmas magic.

• 41:29Speaker 04

  There's some lovely ones here. Sarah Milton at the dinner table at Christmas. We pass around a plain bauble and get everyone to sign it. Then we write the year and put it on the tree. I've just put up my tree and I love reading baubles from years gone by. I love that.

• 41:44Martin Lewis?

  That's beautiful, isn't it? Blobby. Toilet paper is cheaper than tinsel and after being wrapped around a tree can still be used for its intended purpose.

• 41:53Speaker 04

  Don't try and do that in reverse.

• 41:55Martin Lewis?

  And it'll have a pine scent. Yeah, check for the needles.

• 41:57Speaker 04

  Yeah, and Secret Santa for the family massively slashed my present fund. One gift, job done, also saves everyone being given token gifts that end up in the charity shop.

• 42:05Martin Lewis?

  The Reverend Philip, I think we know where this one's going. So many churches put on some really professional standard services that are very accessible to those who don't usually go to church. Castle Church here in Stafford, good plug for Reverend Philip, puts on an amazing interactive Christmas Eve service with giant screens, superb light show and live band, all for free.

• 42:24Speaker 04

  Jill Towers, you can recreate the sound of walking on freshly fallen snow by sellotaping Rice Krispies to the salts of the Jews. Well, I love that, but it only works for two steps, left foot, right foot, and then all the Krispies are crushed.

• 42:41Martin Lewis?

  It feels like a copy of Viz, doesn't it? Yvette Jones, I live on my own, cannot face the palaver or high crust of an Xmas lunch. It's pigs in blankets, Christmas pudding and cream, fireside with a cat and decent film for me. And worth remembering always that Christmas, while a wonderful time for many, is for those who are having grief-filled times and disappointing times or struggles, can actually be a really difficult day. So I wish everyone in that particular situation, I hope you get through it with less problems than you think and more smiles than you'd expected.

• 43:18Martin Lewis?

  Hello, welcome to Money Mastermind where I give Adrian a three option multiple choice question and 14 times he's got it right and 27 times he's got it wrong, which is good, Adrian, because it means you are

• 43:34Martin Lewis?

  currently still better than random chance. Well done.

• 43:38Speaker 04

  Feels good.

• 43:39Martin Lewis?

  But only if you get this wrong, you go to NBRC. Just telling you, it's a warning, lots of pressure. Anyway, the question. They say the car reflects the man. Well, Adrian is proudly driving a 1998 beige Vauxhall Cavalier. 1.2 litres of pure modesty. It's been lovingly modified with an enthusiasm dampener to keep things at a suitably chillsy in pace.

• 44:02Speaker 04

  Do you know, when I was a teenager, my friends used to mock me, mock me savagely, and say my, my ideal car, the ideal car for me was a brown Maxi.

• 44:11Martin Lewis?

  Well, it's quite close, isn't it?

• 44:12Speaker 04

  It is quite close. Chocolate brown rather than beige.

• 44:16Martin Lewis?

  And now you are at this stage and you're still being mocked in the same way, but this time with love.

• 44:20Speaker 04

  Yes.

• 44:20Martin Lewis?

  Now, recently, Adrian got his car insurance renewal for the beige Bullet.

• 44:25Speaker 04

  Nice.

• 44:26Martin Lewis?

  Thankfully, having listened, he didn't auto-renew. Instead, he went to a brand new comparison site aimed squarely at his demographic called mildlybutpersistentlyperplex.co.uk.

• 44:37Speaker 04

  Yeah.

• 44:38Martin Lewis?

  Which, within the quotes, he spotted a substantially cheaper quote than his renewal from his existing insurance for exactly the same policy. You with me?

• 44:50Speaker 04

  Yes.

• 44:51Martin Lewis?

  So Adrian, in that case, which of these can you legally require your existing insurer to do?

• 44:58Speaker 04

  Legally require?

• 44:59Martin Lewis?

  Legally require. A, renew at the higher price, then demand a refund of the difference because the law says existing customers must be given the same price as new ones. B, insist the insurer lowers your renewal to match the comparison site price because the law says existing customers must be given the same price as new ones. Or C, nothing, they are allowed to charge you a different price to what a new customer gets. So you went on a comparison site, a new one, mildlybutpersistentlyperplex.co.uk. You saw a substantially cheaper quote for your existing insurance, exactly the same policy. Can you enforce them to renew at a higher price, but then get a refund of the difference?

• 45:43Martin Lewis?

  Or do you simply say, you have to match the price on the comparison site, I'm going direct to you, or you don't have any legal rights?

• 45:52Speaker 04

  Um, well, if I've got legal rights to do that, I wonder when they were bought in, would that be a competitions authority or insurance ombudsman? It feels to me-

• 46:05Martin Lewis?

  If it were brought in, it would have been brought in by the regulator, the FCA, just to say.

• 46:08Speaker 04

  Yeah, I mean, it seems, it seems unlikely to me that you've got any legal right, but um, um, um, um, and if you do, do you, so you were saying the first one, A is-

• 46:27Martin Lewis?

  A, A is you, you renew and get the difference back, and B is you renew at the cheaper rate, but both of those are that there is a law that says existing customers must be given the same price as new ones.

• 46:38Speaker 04

  Hmm.

• 46:39Martin Lewis?

  Um. And C is you don't have the rights.

• 46:41Speaker 04

  Okay, I think you do have, I think it's B.

• 46:45Martin Lewis?

  You think it's B?

• 46:46Speaker 04

  B, yeah.

• 46:47Martin Lewis?

  Okay, so a few years ago, there was a law brought in to stop what was called the loyalty penalty, which is where existing customers pay more than new customers for renewing their car insurance. And so what that is meant to do is to say that existing customers must be given the same price as new ones. So Adrian, you would assume the answer is A or B, correct?

• 47:08Speaker 04

  Yes.

• 47:09Martin Lewis?

  But it isn't. The answer is C. Play the uh-uh. The answer is C. You don't have any legal rights. And this, I get a lot of questions about this. People get very angry when they see a renewal cheaper. The rule is medium specific. So what that means is you, an existing customer cannot be charged more than the new customer who is getting their policy the same way. And it is absolutely specific. So it depends, you cannot be charged more than the customer going on the same comparison site you went to. Not going on any comparison site, going on the same comparison site. Now, you'll remember in this question, you went to a brand new comparison site, mildly but persistently perplex.co.uk.

• 47:53Martin Lewis?

  And the reason I put in brand new is that means you by definition would, did not originally get your policy through that comparison site, because that comparison- comparison site is new and therefore because you are not going through exactly the same system you do not have a legal right to demand that as an existing customer you get the same price as a new customer now what I would suggest you do is you just go and get that policy as a new customer and you sign up in that way but in terms of the law many people get in touch with me and say I thought they'd stop this I thought they'd stop this price walking that they put the price up every year so as existing customers don't pay more and we could rely on just renewing but you can't because it's product specific and then they can go each year and say well we're going to be cheap on this comparison sites but not on that will just be the same price as direct or we can offer you know exclusive deals here

• 48:37Martin Lewis?

  and there there are ways around it which is why when it comes to your car and home insurance renewal both of which where the new loyalty penalty rule applies don't let that give you a false sense of security that you're getting a good deal your existing policy may still be a pants price and you might be able to get it cheaper elsewhere

• 48:55Speaker 04

  in practice in practice you should be able to get that price

• 48:58Martin Lewis?

  in practice but legally they could say sorry we're not accepting existing customers on that comparison site but I mean often you will be able to do it absolutely right yeah and we're saying that both car and home insurance prices are down this year so if you get your renewal and it's the same price as last year don't sit there thinking great I don't have to do anything you might be able to save 10 or 15% by going to doing the wide comparison of the market

• 49:18Speaker 04

  okay so I'm now bang average

• 49:20Martin Lewis?

  you are now no better than random chance and we'll be playing that next week

• 49:27Martin Lewis?

  okay we're now into the pod only bit and I've got podcast producer Matt with me hello Matt hello now I know we've got lots of questions left on lifetime ISAs and the help to buy ISAs but let me before we get to your questions let me just do a quick introduction of what a lifetime ISA is so a lifetime ISA is a specific product that you can only open if you're between age 18 and 40 so you can open it until the day before you are 40 once you've opened it though it stays open so you can continue to have it and someone could have one up to the age of 48 I think because they first started in 2017 so if you were 48 now you might have opened one then and have a product the big thing on it is that you get a boost of 25% added by the state on contributions you put into it until the age 50

• 50:12Martin Lewis?

  Now you can put a maximum of £4,000 a year into a lifetime ISA. There are both cash lifetime ISAs and shares lifetime ISAs. And then the bonus you get added if you put the maximum £4,000, 25% of that is the £1,000 added on top. So you put four grand in, you have five grand in. That bonus is then accessible if you are exchanging on a first time home as a first time buyer. Now, the definition of a first time buyer is pretty strict. It is someone who has never owned or part owned a home anywhere in the world before. So if you inherited a small share of a house when you were 20 and it was sold 10 weeks later, technically you don't count as a first time buyer anymore. The other time the bonus is paid is if you withdraw it once you're aged 60.

• 50:56Martin Lewis?

  So it's used towards retirement or older age savings if you like. One of the biggest problems on the lifetime ISA that I've been campaigning about is that the maximum property price you can use for an eligible house is £450,000. And that hasn't changed since 2017, even though house prices have gone up. Which means some in London and the south east of England are being priced out of the lifetime ISA. One quick, important thing to know, you can only get the bonus if you've had the product open for a year. So you need to have the product open for a year to get the bonus. So my tip for anybody who might one day want one of these is open it with a quid now and then by the time you get around to using it, you will have already had it for a year. So you don't want to have that criteria.

• 51:38Martin Lewis?

  So you could then put £4,000 in, get £1,000 on top and use it to buy a first time house straight away. The biggest issue, the biggest problem with the lifetime ISA, and the real reason I think it's outrageous that the £450,000 hasn't increased, is if you take your money out of a lifetime ISA for any other reason than buying a qualifying first time home or once you're aged 60, then you pay a withdrawal penalty. And the withdrawal penalty you pay is 25%. Now, you may be thinking they give you a 25% bonus and they take a 25% penalty. You get back to where you are. Well, it doesn't work like that because 20, 25% is on a smaller number and 25% is off a bigger number. What actually happens is

• 52:22Martin Lewis?

  It's an effective penalty of 6.25%. So if you had £10,000 in the lifetime ISA and you withdrew it for any other reason than a first time qualifying, first time property or retirement, you would only get £9,375 back. You'd have to pay the state a fine of £625. Now, I think that's outrageous, especially where I think it is outrageous is for those people who are buying a first time house. So if you're buying a first time house for £460,000, you've saved in a lifetime ISA for the right reason, then it's absolutely outrageous that you then have to pay a penalty to access the money you'd saved, using it for the right reason because you've been priced out. My campaign has been to change the withdrawal penalty for those people buying a property above

• 53:06Martin Lewis?

  the qualifying limit as a first timer, that they only pay a 20% penalty, which basically means they don't get the bonus, but they get back the money they put in. I had hoped that would be in the budget. We've talked in the podcast about my hopes it'd be in the budget. When I spoke to Rachel Reeves about it, she said it wasn't something she could do this time and they have announced a consultation to replace the first time buyer's ISA. And also within that, they will be looking at increasing the property threshold. So that, I'm afraid, has been deferred yet again, and I had similar conversations with Jeremy Hunt, who I thought was going to change this, but yet again, it has been deferred. So that is my warm up, Matt. By the way, the top savings cash out LIsas are Moneybox, Plum and Tembo, all at substantially over 4%.

• 53:48Martin Lewis?

  Shares ISAs, I probably wouldn't be using as a first time buyer because you might want that money at any point. But if you were using this for retirement, where it tends to underperform a private pension for most employees anyway. But if you're using it for retirement, you'd probably then want to be looking at a shares ISA.

• 54:05Speaker 05

  Got it. Do you want some questions for some listeners? Okay. Lauren Parkin, if they kill off the ISA, will they be keeping it open for people currently using it for retirement savings? Or will they have to transfer their savings into another retirement account and will they lose the bonus?

• 54:21Martin Lewis?

  So, that is a completely unknown question. And I have asked the Chancellor about it and she said this will all be in the consultation they do about the product to replace the lifetime ISA. So now what I'm going to do is read between the lines and guess. And it's important I go as solidly as I am guessing here. My suspicion is in a couple of years' time, there'll be a new first time buyer product that's somewhere more like at the old help to buy ISA than a lifetime ISA. It's only for first time buyers, it won't be for retirement. I think they will close the lifetime ISA for new applicants, but those who have a lifetime ISA will probably be able to continue to use it as it is towards retirement savings.

• 55:06Martin Lewis?

  Although I would expect to see the number of providers offering lifetime ISAs shrink substantially. So you will probably still be able to use it for retirement at that point. But we are in a bit of a limbo period at the moment. So I mean, there is a question up to you, a legitimate one that says, should you be putting money in now or waiting to see? And that's something only you can decide. As a really slightly askance point, what I do find is interesting is if you are between 18 and 39 now and you've bought a house, so you would want a LISA as a first time buyer, I would also put a pound in a lifetime ISA now. Why? Well, because if they do close down the lifetime ISA to new applicants and turn the

• 55:51Martin Lewis?

  new thing into a first time buyer's only one, and if at a later date, a LISA does turn out to be good for retirement for you because you've used up your pension and you're self-employed and blah, blah, blah, whatever, then by putting a pound in, you might be able to keep the facility and put more in later. I'm not saying you will or you won't, but it's only a pound, so it's not a big risk. But just to give you the opportunity of that facility may well be worth having. Anyway, so sorry Laura, I can't give you a firm answer, that's because no firm answer exists.

• 56:16Speaker 05

  Okay, one from James. I have a LISA, but with the upcoming consultation, is there any point in continuing to invest in it? Do you think we'll be able to use it for our first home or will it be locked up until I'm retired? If a new scheme is implemented, will the LISA be transferable or withdrawable without charges?

• 56:36Martin Lewis?

  It is my strong suspicion that if you're using it as a first time buyer and you're buying a home less than £450,000, and that's what's likely to happen in the next couple of years, then this hasn't changed anything and you should continue to put your money in a LISA. I don't know that, but there's absolutely, you know, the Chancellor said to me, and there's a clip of me interviewing about this on my social media you can go and look at, you know, there is absolutely no change to LIsas now and nobody should behave any differently on the back of it, type thing. And I think certainly for first time buyers, I think that's true. I mean, the key is the £450,000 property price. I have said to the Chancellor that I will be asking strongly that people with lifetime ISAs and help to buy ISAs, the predecessors

• 57:17Martin Lewis?

  of the lifetime ISA that you can still have now but is closed to new applicants, if, should have the choice to be able to transfer all their money across into the new first time buyers product. Again, I haven't had an answer, but it's certainly something I would be submitting to the consultation. James, if you're saying to me, I'm putting money in, I think I'm going to use an ISA in the next two or three years as a first time buyer on a qualifying property, should I continue? Well, if it was right for you before the budget, in the next two or three or four or five years, it's probably still right for you now as a first time buyer.

• 57:44Speaker 05

  Similar one from Alex. I'll probably buy my first home in the next four to five years and have a LISA. I live in the North West and doubt my first home will be over £450,000, even in four and a half years' time. So generally, the LISA works for me. Should I keep contributing to my LISA to build my deposit or wait till there is more info on how it will change?

• 58:05Martin Lewis?

  So again, I don't know, but my very strong guess would be keep going in your particular situation. You seem to have ticked all the boxes for the type of person who should be using a lifetime ISA. And I can't see, I think it would be really, you know, the worst case scenario is they decide to stop LIsas for new entrants and they don't do a new product. But to penalise you for having money in a product that they supported, I mean, that goes against all forms of natural justice. I don't see it changing in a way that's negative for you. I mean, I can't guarantee it, but I, if I were in your position, I'd keep contributing to my lifetime ISA.

• 58:36Speaker 05

  And I think you may have already answered this, but Lisa Jane, my son's just turned 18. We planned for him to open a cash LISA to save for his first house. Is this still a good idea? Now concerned that he'll start to put into it and when they change, he'll need to withdraw it and pay the penalty.

• 58:52Martin Lewis?

  I think I have already answered it. I think again, in those circumstances, as long as it's for the right reasons. And you understand that if your 18-year-old son wanted to take this money out for any other reason than buying a qualifying house, then he would pay a penalty on it. So if it was right before, it's probably still right now, is my answer.

• 59:09Speaker 05

  Okay, Debbie, my daughter is 22 and is looking to open a ISA for retirement instead of starting a private pension. The best one seems to be online, but we're a bit nervous about doing one that's not a high street and we don't know where to start. Any advice on the best ones to go with is very much appreciated.

• 59:27Martin Lewis?

  There's a reason that high street banks don't offer the lifetime ISA. And that is primarily because they're scared of being done over, misselling on the retirement element, not the first-time buyer's element. So let's just be really plain for your daughter, Debbie. Generally, first of all, if she is an employee, then a pension is almost certainly a better idea than a lifetime ISA for her. Both because when you put money into a pension, it's already tax efficient. The money comes from your pre-tax earnings. Money you put into a lifetime ISA comes from post-tax earnings. Let's go very plain on that. So you earn for every £100 as a basic rate taxpayer, your daughter earns.

• 1:00:07Martin Lewis?

  If she puts it into a private pension, then she will have £100 going into it. If she puts it in a pay packet, she'll have £8 national insurance and £20 tax, so she'll only take home £72. Now, if she puts it into a private pension, she'll still pay the national insurance. But that extra £20 of income tax that she would have paid is now being put into her pension. So that's the tax efficient nature. In a lifetime ISA, the key to a lifetime ISA is you get the 25% bonus. So it's sort of equivalent as a basic rate taxpayer. But if your daughter is employed and she goes through the auto-enrollment system that happens automatically even if you don't choose it, then you can contribute 5% of your salary, assuming she's the right age, she's 22, so that's perfect.

• 1:00:52Martin Lewis?

  She's got to be 22 and over and earning over £10,000. And the employer has to match it up to at least 3%. So now that £100 you put in, you're getting 60 from your employer. So it's costing you effectively, I'll ignore national insurance, it's costing you 80 quid as a basic rate taxpayer and you're getting £160 in your pension. As a top, as a higher rate taxpayer, 40% is costing you 60 quid and you're getting £160 in your pension. If we look at this... Without the employer element, let's say your daughter's self-employed, because it does say private pension, although employment pension would be more lucrative. Well, then as a higher rate taxpayer, she again is probably that the tax gains from

• 1:01:32Martin Lewis?

  a private pension would still likely outperform a lifetime ISA, but it is much closer and it's a very complicated one and I'm doing broad brush and you should do more readings on it. If she's a basic rate taxpayer, then a lifetime ISA and private pension tax, it sort of tends to balance itself out a bit more and the LICE have the advantage that you don't pay tax when you take it out at the other end, but you would if you were to withdraw it before she was aged 60. So there's lots of ifs and buts. Again, though, and you know, the truth is, if you're talking for a private pension, I presume you're talking about a shares-based investment because it's over the long period, in which case you wouldn't really want to go for high street banks anyway, you'd want to go with the best, better investment platforms that are out there.

• 1:02:15Martin Lewis?

  And we've already talked about some of those that give you a nice wide choice with low charges. So hopefully I've sort of answered that question, though there is uncertainty about the lifetime ISA as a retirement vehicle because of this consultation that's coming.

• 1:02:29Speaker 05

  And a final one from Lyn. My kids opened a Help to Buy ISA when they were 16. I'm not sure they'll be ready to buy before they're 26. Will they lose the bonus of £3,000 if not used in the 10 years?

• 1:02:41Martin Lewis?

  Probably yes. I haven't actually read the closing details, it's 2029 when the Help to Buy ISA closes. So the key to a Help to Buy ISA, the big difference between the Help to Buy ISA, the LICE's predecessor was three things. One, you could only buy a house worth up to £250,000 unless you're in London when it was £450,000. The lifetime ISA is £450,000. Two, the bonus on a Help to Buy ISA you get when you complete, whereas with a lifetime ISA it's when you exchange, which is better because it can then be used towards the deposit for a house, whereas a Help to Buy ISA can only be used as a deposit towards your mortgage because it comes later in the process. And three, you can withdraw your money from a Help to Buy ISA whenever you like.

• 1:03:22Martin Lewis?

  There's no problem. You don't get the bonus, but there's no penalty, which means it's much more flexible. So the worst thing that happens is you've got a savings account, it's in an ISA, it's tax free. At the end of 10 years, if they haven't used it, they wouldn't get the bonus, but they would get back all the money they would put in plus interest with no penalty. So the risk isn't that high compared to keeping it in there. But and there is a chance, and I'll certainly be lobbying for it, that the new first time buyer's ISA that comes up in this consultation may allow them to transfer their Help to Buy ISAs into it. And therefore will have a better longevity than just the Help to Buy ISA by itself. And I think, is that when we get to the end of ISAs?

• 1:04:01Speaker 05

  That's it.

• 1:04:02Martin Lewis?

  I realised there was one thing I didn't say, which I'll do as my final thought. I started this by saying, you know, your money is often nicer in an ISA. Well, certainly on shares ISAs, that tends to be the way because the fees tend to be similar, though you should always check. With a cash ISA, the one time it doesn't do as well is if you're not a taxpayer, so you are not earning more interest than your personal savings allowance, let's say, where you can earn a thousand pounds of interest a year without paying tax. On fixed rate ISAs especially, the rates are lower than normal fixed rate savings. So if you weren't going to pay tax on it anyway, because you're within your tax free allowances,

• 1:04:43Martin Lewis?

  then you can get higher interest rates outside of an ISA for fixed savings than you can inside an ISA. The advantage of fixed savings inside an ISA is you're always allowed to withdraw your money, though you have to pay an interest rate penalty. Whereas outside of an ISA, in normal savings, fixed rate savings, your money is locked away. But if you're planning to lock your money away for a set period and you won't be paying tax on it, then you are probably going to get a higher rate, about 0.2 percentage points higher, by putting your money in normal fixed savings than the cash ISA. So the ISA wrapper is advantageous, but it still does always depend. And this is what I've hopefully got the point across by saying it's just a wrapper. It's what you put in the wrapper that really counts. Now, you put in an investment that's a bad investment, you're going to lose money in a shares ISA.

• 1:05:27Martin Lewis?

  You put in a good investment, you're going to make money. You put in the best easy access savings accounts in a The cash ISA, well, it's going to perform well for you compared to in a normal savings account if you pay tax. But ultimately, it's just a wrapper and it's what you put in the ISA. Which cake you choose and where that cake's from and who's manufactured it and how they baked it and is it a good one? And are they charging a lot of fees for making it? Probably stretching the analogy, which cake you use, not the cling film, which is what really matters.

• 1:05:55Martin Lewis?

  And let's just finish off this pod with a few more of your tellers, ways that you can get Christmas magic. I've got Mrs Dolly here. Get a little, other supermarkets are available, she says, £4 amarillis with a pot and compost. Give it to family members, then have a race on whose will be the first to flower. I like that.

• 1:06:14Speaker 05

  I like that, but it's going to take a while.

• 1:06:15Martin Lewis?

  Yeah, but, you know, delayed gratification is good, Matt.

• 1:06:18Speaker 05

  Mm-hmm, true. Kevin, wrapping the doorway in Christmas paper so the kids have to burst through it to get to their presents, I like that.

• 1:06:24Martin Lewis?

  I love that, you can just, that would be so cool. Christie, a Christmas sing-along, have the children write out and decorate multiple copies of the lyrics to the 12 days of Christmas and have all the family sing. Remember to especially shout out, "Five gold rings."

• 1:06:40Speaker 05

  Beautiful.

• 1:06:43Martin Lewis?

  I shouldn't have done that.

• 1:06:44Speaker 05

  Natasha says, "We still took a postcard declaring the winner of our street's decorations through the door. The family one is anonymous, the scout pack one not at all, and we all sign it."

• 1:06:53Martin Lewis?

  Oh, that's nice, that'll give one of your neighbours a big smile, I'm sure. And that is it, that's it for this week. Hopefully you've understood how ISAs works and you've got a little bit of extra magic for your Christmas.

• 1:07:06Martin Lewis?

  That's it for this week. If you've enjoyed it, please tell your friends you've been listening to the Martin Lewis podcast and why not subscribe, then your pockets will be pleased with you. We tend to put out a new episode every Thursday and also on Mondays too, in the form of the Question Time podcast, where you can ask me questions on absolutely anything and everything, within reason. And if you haven't enjoyed it...

• 1:07:29Speaker 06

  Martin Lewis is the founder of MoneySavingExpert.com. But of course, other consumer and price comparison websites are available. You can get in touch with Martin's podcast production team by emailing martinlewispodcast at bbc.co.uk. The offers and rates mentioned in the podcast are correct at the time of recording. However, if you are listening on demand, it's worth double checking as details can date. Remember to subscribe on BBC Sounds and leave us a review however you listen.

• 1:08:21Speaker 07

  Hello, I'm Chris Richards, general manager at Safford Volkswagen Richmond. I'm here to announce an exciting new programme that I want you to listen to. Here's my friend Happy. Hi, I'm Happy Harry Turner, special finance manager at SaffordCredit.com. If you're in an open Chapter 13 bankruptcy, recently filed a Chapter 7, or you've been turned down because of credit challenges, don't give up. For nearly 30 years, I've helped people get reliable transportation when others said no. Visit SaffordCredit.com. Remember, I'm not happy unless you are.

• 1:08:50Speaker 07

  In Our Time is a world-class seminar every week. Why was Jeremy a lonely snail? What were lines doing in York in the third century? I'm Misha Glennie, and every week I'm joined by expert guests to explore the ideas that shape our world. It's one of the first times, really, that you consistently see someone painting teeth. I know that sounds bonkers. If I was going to define mathematics, I would say it's the study of structure. In Our Time. Listen on BBC.com or wherever you get your podcasts. Tea or coffee? Love a cup of tea.