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Schemes by Chancellor Rachel Reeves to reduce that amount saver can put in cash isa Will upset millions of people but will not be able to achieve what she wants, Wealth expert martin lewis There is a warning.
His Budget Next month, Ms Reeves is expected to change the rules for tax-free ISAs, reducing everyone’s annual allowance from £20,000 to £10,000.
She wants to promote an American-style investment culture in Britain by encouraging people to put their money in shares of British companies rather than cash.
One option being considered is to halve the limit allowable in a cash ISA, FT report,
But Mr Lewis, founder of the MoneySavingsExpert brand, said cuts to cash ISA limits would discourage people from investing in shares without encouraging them, leaving Ms Reeves hoping billions in savings will be diverted to domestic shares.
“Millions of older people will be affected by the Cash ISA cut and I suspect it will change the investment landscape,” he wrote on social media.
“This will mean more tax will be paid on savings, and raising cash for mortgages will be a problem for building societies.”
The Treasury would receive more tax from savers if they put money into standard savings accounts that were not protected from tax.
In the 2023-24 financial year, savers put almost £70 billion into cash ISAs – a 67 per cent increase year-on-year, and more than 15 million people used some or all of their allowance, government figures show.
It is expected that this year’s ISA figures will be higher still, driven by expectations that Ms Reeves will cut the allowance.
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Back in February, It was reported that she was considering reducing the annual limit to £4,000that later abandoned the planBut now it appears that the idea of reforming the ISA has been revived.
He has argued that investing more in shares would boost British businesses and provide higher returns to investors.
Mr Lewis acknowledged that “the lack of investment is a problem” but insisted that cutting Cash Isa limits was not the solution.
“If they [the Treasury] They were saying they were doing this to increase revenue, at least that would be logical,” he wrote.
“There needs to be investment, better education and better incentives to encourage them.”
He proposed a “Starter Investment Isa Bonus” for young people on investments of the first £2,000, funded by investment firms.
Savers can split their £20,000-a-year Isa allowance between a variety of ISAs, including cash ISAs, stocks-and-shares ISAs and lifetime ISAs.
A Treasury spokesman said: “Cash savings are important for people who want to stash cash away for a rainy day, and we will protect it. But the Chancellor has been clear that she wants to get investment back into the UK – so that British companies can grow and British savers who choose can get more in return.”