Rachel Reeves tax grab exposed as ISA change means 2m to pay more | Politics | News

Rachel Reeves’s tax grab has been laid bare by an expert, who has revealed how many more people can expect to fork out more for the Treasury as a result of the Budget. Up to two million could end up paying more tax on their savings, they suggest, thanks to a levy on interest once they exceed the personal savings allowance, and if they continue to earn interest on savings outside an ISA. Continuing to save £20,000 annually will cost £264 in tax for basic-rate and £1,216 for higher-rate taxpayers over five years after the allowance is lowered from £20,000 to £12,000, from April 2027. Individuals aged 65 or above are exempt.

Andrew Prosser, Head of Investments at InvestEngine, said: “Our analysis shows that almost 1.5million basic-rate taxpayers and just under half a million (462,000) higher-rate taxpayers deposited more than £12,000 into their Cash ISA in the last financial year. Now that the allowance has been cut down to £12,000, they will need to find somewhere else for this cash for anything over that amount.

If they were to put that £8,000 – the difference between £20,000 and the new £12,000 limit – into a 4.5% savings account, after five years, a basic-rate taxpayer will have lost around £264 in tax, while a higher-rate taxpayer could lose around £1,216, or £234 a year once their total savings interest exceeds the £500 allowance.”

InvestEngine research has resulted in the following figures:

Basic rate taxpayer (20%)