Latest news with #cashISA
The Sun
11-07-2025
- Business
- The Sun
Plans to cut £20k tax-free allowance for cash ISAs shelved by Rachel Reeves amid backlash
PLANS to cut the tax-free allowance for cash ISAs have been put on hold by the Chancellor in a move that has been welcomed by savings experts. It had been speculated that Rachel Reeves would announce the major change to the savings accounts, which currently offer tax-free interest on up to £20,000, in her Mansion House speech on July 15. 2 However, it's understood that the Chancellor has now scrapped the plans following backlash from banks, building societies and campaigners, and will instead focus on encouraging more people to invest in stocks and shares. Welcoming the move, Nottingham Building Society chief savings officer Harriet Guevara, said: 'This is positive news for savers and for lenders. 'We've consistently made the case, alongside others across the mutual and building society sector, for maintaining the full allowance, and welcome any decision to consult further with industry rather than rush through damaging reform that would disincentivise saving. 'Cash ISAs remain a vital tool for millions to build financial resilience over time, particularly in the current economic climate. 'Our data shows more than half of our fixed ISA customers used the full £20,000 allowance last year, rising to 65% among those who save in-branch, underlining just how important this option is to those trying to get ahead financially.' Some building societies reported seeing a jump in cash ISA applications last week, as speculation intensified over the future of the allowance. They also warned that mortgages could become more costly and harder to access if the cash ISA limit was cut, with retail deposits being needed to fund mortgage lending. A Treasury spokesperson said: 'Our ambition is to ensure people's hard-earned savings are delivering the best returns and driving more investment into the UK economy.' Martin Lewis issues reminder to anyone born between 1984 and 2006 as they can get £1,000 free 2
The Independent
11-07-2025
- Business
- The Independent
Reeves pauses cash ISA changes after backlash
Rachel Reeves has put her plans to reform cash ISAs on hold after speculation that she was considering reducing the allowance for tax -free cash savings was met with criticism from banks and building societies. Savers have a £20,000 annual allowance which can be split across ISA types, but the most frequently used version is the cash ISA, which gives people a tax -free savings account. However, the government wants to encourage more people to start investing, to generate better long-term returns. Next week, the chancellor was expected to use her Mansion House speech to cut the limit on how much money could be put in the cash ISA product annually and potentially announce changes to the Lifetime ISA too, but that reform will now have to wait, with reports saying Ms Reeves wants to continue to consult with industry experts amid conflicting ideas on how to proceed. What did Ms Reeves want to do and why? More than £300bn is currently held in cash ISAs, earning interest – but often at underwhelming rates. While some accounts now offer interest above 4.5 per cent, which outpaces the current inflation rate of 3.4 per cent, many savers are earning far less. As a result, their money may not be keeping up with inflation, leading to a loss in real value over time. Cutting the limit from £20k to £5,000 a year, as had been speculated, was intended to be a way to encourage people to put excess cash savings into investments instead. 'Our ambition is to ensure that people's hard-earned savings are delivering the best returns and driving more investment into the UK economy,' said a Treasury spokesperson. Why were plans criticised? First of all, there is little to suggest that people would divert spare savings straight into investing if they don't already do so. The Building Societies Association (BSA) wrote this week to Ms Reeves to urge her not to reduce the cash ISA limit, saying those who didn't invest yet needed better advice and education to encourage behavioural changes. 'Simply changing ISA limits is unlikely to encourage people to invest, but it will hurt people who are responsibly saving for short-term goals, where investing may not be appropriate,' read the letter. Additionally, there's little reason to believe that if people did invest, that money would go into UK businesses or provide them with any extra funds. Buying shares for private (or retail) investors typically takes place on exchanges where they would simply buy those shares other people are selling. More importantly, stamp duty costs on buying British-listed shares are seen as a bigger barrier to domestic investment - a 0.5 per cent charge is placed on purchases, whereas there is no such cost to buy stock in companies based in the US or Europe. What does it mean for savings? For now, nothing has changed - if you use a cash ISA you can continue to do so for a maximum of £20,000 a year, though most people do not max out their allowance. If the ISA allowance was cut, it could run the risk of people paying more tax due to fiscal drag: extra savings outside an ISA would count towards total income, which may push people over tax thresholds, reduce their tax-free interest allowance and thus get taxed on a large chunk of interest earnings. Within an ISA, no gains are taxable whether interest payments, dividends or capital growth.
The Independent
09-07-2025
- Business
- The Independent
Rachel Reeves urged to leave cash ISAs alone
Rachel Reeves is under pressure from building societies and other financial organisations not to reduce the annual cash ISA limit. The chancellor is expected to announce a cut from the current £20,000 allowance during her Mansion House speech on 15 July, aiming to encourage wider investment. An open letter, signed by leaders from Nationwide, Skipton Group, Yorkshire Building Society, and Hargreaves Lansdown, argues that cash ISAs are a cornerstone of personal savings and support affordable lending. The signatories warn that significant reductions to cash ISA limits could make lending more scarce and expensive, potentially undermining economic growth and housing initiatives. Industry experts widely dismiss the plan, stating that simply changing ISA limits is unlikely to encourage investment and could instead hurt responsible savers by forcing them into taxable accounts.
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The Independent
09-07-2025
- Business
- The Independent
Rachel Reeves under pressure to save cash ISAs after building societies pen open letter to chancellor
Rachel Reeves is under fresh pressure not to cut the cash ISA limit after building societies penned an open letter to the chancellor, describing them as 'a vital role in the broader economy'. The chancellor is expected to announce a cut from the current £20,000 per person annual allowance during her Mansion House speech on July 15, as part of a push to encourage people to invest more widely. But the Building Societies Association (BSA) is now pleading with her to leave the popular savings product untouched. Nationwide chief executive Debbie Crosbie is among the signatories, along with leaders from Skipton Group, Yorkshire Building Society and the Scottish Building Society. They are joined by organisations such as the Institute of Customer Service, the Investing and Saving Alliance and, significantly, the UK's largest investment platform in Hargreaves Lansdown. In the open letter, they described cash ISAs as 'a cornerstone of personal savings for millions'. It continued: 'The funds deposited in these accounts support lending, helping to keep mortgages and loans affordable and accessible. 'Any significant reductions to the cash ISA limits would make this funding more scarce which could have the knock-on effect of making loans to households and businesses more expensive and harder to come by. 'This would undermine efforts to stimulate economic growth, including the government's commitment to delivering 1.5 million new homes.' The plan to cut cash ISA rates as a means to encourage investing has been widely dismissed as unlikely to work by industry experts, at least as a standalone method. Data has also shown those who tend to save more, instead of investing excess funds, would simply look to save it in a non-ISA account instead, potentially paying tax when previously they did not - and therefore decreasing peoples' wealth rather than adding to it. Building societies collectively hold more than half a trillion pounds in assets, with residential mortgages totalling £395bn - almost a quarter (24 per cent) of all those in the UK. Building societies also account for 40 per cent of all cash ISA balances. Robin Fieth, BSA chief executive, said: 'Cash ISAs are used for a wide range of purposes—from saving for a first home to managing finances in retirement. These are not idle funds; they serve real, practical needs for both savers and the building societies, banks and other providers that receive the funds, and use them to support mortgage and other lending. 'Simply changing ISA limits is unlikely to encourage people to invest, but it will hurt people who are responsibly saving for short-term goals, where investing may not be appropriate.' Cecilia Mourain, savings officer at Moneybox, added: 'At Moneybox, over one million people are saving and investing through tax-wrapped accounts on our platform, many of them on modest incomes. We know that a cultural shift towards investing won't come from cutting the Cash ISA allowance, it will come from working with the industry to build confidence among savers. 'Any changes to the ISA regime must be long-term, consumer-first, and coordinated with broader regulatory reforms, such as the FCA and Treasury's Advice Guidance Boundary Review. Without this, the government risks undermining trust in one of the most successful savings products of the last 25 years.'
The Independent
01-07-2025
- Business
- The Independent
Best savings accounts in July to earn on your money before expected interest rates cut this summer
Earning as high an interest rate as possible on your money is always the ideal situation, but it becomes even more important when inflation is running high, as it is in the UK right now. The value of cash is eaten away by inflation, so one way to protect your overall wealth is to make sure your savings are earning a greater rate whenever possible - right now, that means at least 3.5 per cent. Thankfully, that's very much achievable at the moment whether you want to lock cash away at a fixed rate for a specified length of time, or even if you need easy and quick access to funds but still want it to be earning more money for you. However, with the Bank of England expected to cut interest rates once more when they meet in August, it's vital you check out where your money is right now and make sure that you're getting a good deal. If not, here's our round-up of the best savings accounts at present - though always remember to ask your bank or building society if they have even higher rates available, as some banks offer specific deals for regular savers only available to existing customers. Rates are correct at the time of publishing, and all brands mentioned are FSCS protected. Best cash ISA accounts You may have seen the news recently that cash ISA limits are to be cut soon. There's no confirmation on what level they will go to, so at present, you can still put £20,000 per person each year into one. Plum is giving a market-leading 4.95 per cent at present for an easy-access ISA, with three penalty-free withdrawals allowed each year. This includes a bonus rate, so be sure to note dates it expires to switch if needed. Note, this isn't a bank - it holds your money in places like Lloyds and Citibank. Moneybox pays 4.65 per cent and also includes a 12-month bonus rate. Again, three withdrawals are allowed without impacting the interest rate. Tembo offers 4.64 per cent, slightly lower, but allows unlimited withdrawals which can take a couple of days to process. Be aware of ISA rules - none of the above are flexible ISAs so if you put money in, take it out again and then want to put it back in, that counts towards your limits twice. The best rate flexible ISAs are around 4.1 per cent from the likes of Skipton Building Society or Wealthify. Of course, all these interest rates can change due to competition or bank rate changes. Best easy-access savings accounts For normal, standard savings accounts, we've found three options which are currently offering above 4.5 per cent. At that level or lower, there are a whole host of names, big and small, which are competing at a similar level. Choose by the terms which matter most to you. For the higher options, Atom Bank is at the best level right now with a decent 4.75 per cent rate - remember, the Bank of England's base rate at present is 4.25 per cent, so this is a fair bit higher for now. However, it's designed to encourage consistent saving: you get that headline rate in months you don't make a withdrawal, and a lower 2.5 per cent rate in months you do make one. Cahoot, owned by Santander, offers 4.55 per cent. Clearly that's a bit lower than Atom, but the trade-off is that the rate is not impacted if you need to withdraw money - cash can go in or out whenever you like. Though if you happen to have more than half a million pounds, it doesn't pay interest above that level... Finally, digital bank Sidekick is offering 4.51 per cent, which includes a 12-month bonus. It offers unlimited next-day withdrawals and partners with OakNorth Bank to hold your funds. Best fixed-term accounts For fixed-term deals, it really depends on how long you are keen to have your money locked up for. The trade-off is this: the longer term you choose, the longer you can't access cash for. However, with interest rates heading downward, you can benefit from a guaranteed higher rate for much longer than the rest of the market gets. Also, be aware any interest you earn is taxable in the year you receive it - worth bearing in mind if you take a two-year lock-in or longer. For six-month deals, several banks, including Nottingham Building Society, offer 4.47 per cent. On 12-month options, Marcus, by Goldman Sachs, has a 4.55 per cent deal. If you want monthly interest payments instead of at maturity, Vanquis offers 4.52 per cent. And for two-year deals, GB Bank offers 4.43 per cent, with a minimum opening balance of £1,000. Be sure you don't need access to your money before choosing longer-term deals.
