a day ago
Rachel Reeves to announce cash Isa cut
Rachel Reeves is poised to announce a cut to the annual tax-free cash Isa allowance, reports suggest.
The Chancellor is expected to confirm that she will reduce the £20,000 cap on the amount that can be shielded from tax in cash Isas each year in her Mansion House speech on July 15.
Ms Reeves confirmed last month that she had no plans to reduce the total amount that can be paid into Isa products each year.
However, the cash Isa limit is understood to still be under threat, with the Chancellor having previously been urged by City bosses to reduce the allowance to as little as £4,000.
One Whitehall source familiar with the discussions told the Financial Times that ministers had been listening to those lobbying in favour of a higher limit, and that negotiations about the level it would be set at were still ongoing.
The Government wants to reform cash Isas to push more people to invest in stocks and shares.
There has been intense lobbying on either side of the debate by building societies who use cash Isa savings to fund loans, and City firms keen to boost investment in the stock market.
Industry experts have condemned any move to slash the cash Isa allowance, warning it would damage incentives for long-term investment.
Cutting the allowance would mean millions of people could save less each year tax-free, and would face a choice between putting money into taxable savings accounts or investing in riskier stocks.
A recent survey by stockbroker, AJ Bell, suggested that only one in five savers would switch to the stock market if their limits were cut.
There are four main types of Isa: cash, stocks and shares, lifetime, and innovative finance. Cash Isas are the most popular product, with savers stashing away a record £49.8bn last year – a 6pc increase on the previous year.
Isa limits were originally set at £7,000 when the savings accounts were introduced by Gordon Brown, the former chancellor, in 1999.
The annual allowance was fixed at £20,000 from the 2017-2018 tax year, with no requirement for savers to put money in stocks and shares instead of cash. Junior Isas (Jisas) have an annual limit of £9,000.
