Chancellor Rachel Reeves is facing urgent warnings over a potential 'scary' tax raid on savings that could see the cash ISA allowance slashed in half for millions of Britons.
What's Being Proposed?
The radical measure, reportedly under consideration by HMRC, would reduce the annual cash ISA allowance from £20,000 to just £10,000. The Labour Chancellor is set to outline her full tax plans during the highly anticipated Autumn Budget on November 26.
Chris Rudden, Head of Investment Consultants at Moneyfarm, confirmed the speculation is gaining momentum. "As the Budget fast approaches, rumours are swirling once again about the creative ways the government might try to raise more tax revenue," he stated, highlighting the aim to plug the UK's fiscal black hole.
Why Cut the ISA Allowance?
According to financial experts, the government has several desired outcomes from this potential policy shift.
The primary objective is to encourage a national shift away from cash savings and towards investment products. Proponents argue that such a move could provide a significant boost to the UK stock market and help reverse the declining trend of companies choosing not to list in the UK.
Ultimately, the policy could unlock billions of pounds to be invested directly into UK businesses, driving economic growth and innovation.
Expert Warnings and Public Concern
However, Mr Rudden issued a stark warning about the potential consequences for ordinary savers. "Cutting the Cash ISA limit isn't going to suddenly prompt people to invest a significant portion of their savings in a Stocks and Shares ISA, a product seen by many as intangible and, frankly, scary," he cautioned.
He emphasised that the government needs to prioritise public education about the risks and rewards of investing before abruptly limiting access to safer, more familiar savings options like cash ISAs.
While the November Budget may not bring immediate changes, the policy direction appears clear. Future governments are likely to continue reshaping the ISA landscape to favour investment over long-term cash holding.
A Treasury spokesperson sought to reassure the public, stating: "Cash savings are important for people looking to put cash away for a rainy day and we will protect that." They added that the Chancellor's goal is to get Britain investing again, enabling both company growth and better returns for savers who choose to invest.