People with cash ISAs must know this ahead of Rachel Reeves change | Personal Finance | Finance
A proposed change to Cash ISAs accounts could come into effect, and there is one thing to know in case it does.
Though there is no confirmed date for the change, Cash ISA accounts could see the tax-free savings limit drop from the current amount of £20,000 to just £4,000 as soon as 2026. It comes amid a series of proposed economic changes spearheaded by Rachel Reeves and the Treasury.
The savings cap, which was allegedly set to be included in the Spring Statement on March 26, has since been pushed back to later this year. A report suggests the Labour government will lower the annual amount savers can invest in their tax-free cash ISAs as a means of building interest in equity investment.
Chancellor Reeves previously told reporters: “It’s really important that we support people to save to achieve their aspirations. At the moment, there is a £20,000 limit on what you can put into either cash or equities (ISAs) but we want to get that balance right.
“I do want to create more of a culture in the UK of retail investing like what you have in the United States, to earn better returns for savers.”
UK savers were split on what this means for their accounts, but one has shared a crucial point to be aware of if the changes make place.
A post to the r/UKPolitics subreddit, where news of the planned Cash ISAs cut was shared, saw one user explain the very basics of how the allowance works.
They wrote: “Just in case, like me, you didn’t know how the allowance works, it’s PER YEAR. So at the moment you can put £20,000 into an ISA without paying tax.
“Next year you can put in another £20,000 and still not pay tax. And so on until you have hundreds of thousands of pounds in your ISA that isn’t liable for any tax. There are very few people who have enough spare money to save even £6,000 a year every year and if they do, there are probably better places to put it than a cash ISA.”
Savings expert Martin Lewis has opposed Cash ISA restrictions and told a comittee of MPs that the government should not reduce the limit.
He said: “I’ve already had people telling me they are worried about what’s going on, so they are going to withdraw from cash Isas, which is clearly not the right thing to do. I don’t think we should reduce the cash Isa limit.”
Further pushback against the implementation of a Cash ISA limit comes from Robin Fieth, the Building Societies Association chief executive, who says the company will continue to press the chancellor on the Cash ISA issue.
He said: “It’s clear many people are making a conscious decision to save in cash rather than stocks and shares. We will continue to press the chancellor to listen to all sides of the cash Isa argument, not just to the loud voices of a group of self-interested big businesses.”
