Chancellor Rachel Reeves is facing significant warnings as she prepares to deliver the Autumn Budget next week, with speculation mounting that the Cash ISA allowance could be dramatically reduced.
What changes are being considered?
The current Cash ISA allowance of £20,000 could be slashed to as little as £10,000 according to budget discussions. This potential move forms part of the Labour government's strategy to address the £40 billion financial black hole they claim to have inherited from the previous Conservative administration.
Ben Mitchell, Director of Savings at Chetwood Bank, has been vocal in his criticism of the proposed changes. He stated: "Speculation has been rife in the lead-up to the 2025 Autumn Budget, and ISAs have emerged as a potential focal point for reform."
Why experts are concerned
Mitchell emphasised that altering ISA rules would represent a significant risk, urging the Chancellor to "resist the temptation to tinker further with ISA rules." He highlighted how tax-advantaged savings have undergone constant adjustments since their origins as PEPs and TESSAs, evolving from straightforward savings vehicles into unnecessarily complex products.
The savings expert explained the crucial role Cash ISAs play in providing people, particularly those approaching retirement, with a safe and tax-efficient way to hold cash. "By providing a simple, secure wrapper safe from volatility and unnecessary tax, savers can de-risk their portfolio when they need to," Mitchell added.
The case for simplification
Rather than implementing further changes, Mitchell advocates for simplification as the priority. He stressed there's no guarantee that altering ISA rules would encourage more money to flow into other investment assets like stocks and shares.
"Rather than further tinkering, the priority should be simplification, both of the ISA wrapper itself and of the route to guidance and advice," the savings director continued. "This would benefit investors and product providers alike, helping people make their hard-earned savings work as hard as possible."
This will be the second budget delivered by the Labour government since taking office, with the Autumn Statement scheduled for next week expected to contain several significant announcements affecting personal finances across the UK.
