Martin Lewis warns Rachel Reeves’ cash ISA cut plan will upset millions
Money expert Martin Lewis warns that chancellor Rachel Reeves’ plans to reduce the amount savers can put into cash ISAs will upset millions of people but will not get her way.
In next month’s budget, Ms Reeves is expected to change the tax-free ISAS rules and cut everyone’s annual allowance from £20,000 to £10,000.
He wants to encourage an American-style investment culture in the UK, encouraging people to invest their money in shares in British companies rather than cash.
One option being considered is halving the limit allowed on cash ISAs. The FT reported.
But Mr Lewis, founder of the MoneySavingExpert brand, said the cut to the cash ISA limit would disappoint people without encouraging them to invest in shares; Ms Reeves hopes this will channel billions in savings into domestic stocks.
“The Cash ISA cut would simply fool millions of older people and I doubt it will shift the dial on investment,” he wrote on social media.
“This just means more tax on savings and trouble for building societies raising cash for mortgages.”
The treasury would collect more taxes from savers who put money into standard savings accounts that are not protected from taxes.
Savers put almost £70bn into cash ISAs in the 2023-24 financial year, according to government figures; This figure increased by 67 percent on an annual basis, with more than 15 million people using some or all of their allowances.
This year’s ISA figures are expected to be even higher due to expectations that Ms Reeves will cut the allowance.
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In February it was reported that it was considering reducing the annual limit to £4,000. He later abandoned the plan but now appears to have revived the idea of reforming ISAs.
He argued that investing more in shares would strengthen British businesses and create higher returns for investors.
Mr Lewis acknowledged “lack of investment is a problem” but insisted lowering the cash Isa limit was not the solution.
“If they [the Treasury] “They were saying they were doing this to increase revenue, so at least that would make sense,” he wrote.
“They need to encourage investment, better education and better incentives.”
He suggested giving young people a “start-up investment Isa bonus” for the first £2,000 invested, funded by investment firms.
Savers can split their annual Isa allowance of £20,000 between different types of ISAs, including cash ISAs, stocks and shares ISAs and lifetime ISAs.
A Treasury spokesman said: “Cash savings are important for people looking to save cash for a rainy day and we will protect that. But the Chancellor has made clear he wants Britain to reinvest so British companies can grow and British savers who choose to do so can get more in return.”
