Rachel Reeves to slash Cash ISA – and 3 more tax threats to pensioners | Personal Finance | Finance

The idea of ​​reducing the cash ISA allowance was first floated in February, when Rachel Reeves was rumored to cut it from £20,000 to just £4,000 a year. The official view is that savers should be putting more money into Stocks and Shares ISAs as stocks should provide a better return over time. It will also provide greater cash flow to UK businesses.

But actually this is tax extortion by the Treasury. Most experts think they won’t shift their savings from cash to stocks and shares. Savers are more likely to park their deposits in standard bank accounts where interest is taxable.

Currently, approximately 3.2 million retirees pay income tax on savings interest; This figure has risen further due to rising interest rates and the freezing of income tax thresholds and personal savings allowance.

This is a significant gain for the Treasury, but a loss for retirees. Many stick to Cash ISAs because they don’t want to gamble on the stock market at their age. This makes sense since they have less time to recover from the stock market crash.

Stocks and shares can make money work harder, but for older savers, the risks can be frustrating. Savers need to take full advantage of this year’s Cash ISA allowance, although it is still at £20,000.

That’s not the only way Reeves will target retirees next month.

There is plenty of speculation ahead of the Budget as journalists, accountants and consultants try to work out what the Chancellor might do. The treasury is not innocent either; coming up with ideas to see how voters will react.

I’ve done my part in the past, but this year I’ve been cautious. Pre-budget conversations can push people to make hasty moves. Before last year’s budget, rumors were that Reeves would reduce the 25 per cent tax-free cash limit on pensions from £268,275 to as little as £100,000 or £40,000. Some rushed to get their tax-free cash from the budget, then regretted it when nothing happened.

Now the rumors are back and wreaking havoc again. This is no surprise, with a potential windfall for the Treasury of around £2bn. Personally, I still doubt Reeves would accept this; That would certainly be very unpopular. But the option has not disappeared.

Today, everyone who wants to get their money is faced with a difficult choice. As a rule, savers must leave the money in their pension until it is needed to be exempt from tax.

However, if you are already thinking of buying it, now may be the time. If you’re unsure, seek financial advice.

There are two more ways Reeves can attack retirees (and more may come!).

Think Tank, Resolution Foundation, suggested cutting 2p from National Insurance and adding 2p to income tax. Why bother?

Again, we target retirees. They don’t pay NI but To do Pay income tax. So this could cost £6bn. The budget is being written by Torsten Bell, former boss of the Resolution Foundation, so keep an eye out for that.

Many retirees are already paying more income tax and will be harmed if Reeves extends the freeze on income tax thresholds for two years until 2030. Of course, this would also affect working-age people and break a major Labor manifesto commitment. This would cause a scandal, but Reeves may not have a choice.

Finally, Reeves could unleash new property taxes, such as a higher municipal tax on expensive homes or a new tax on sales of pricier properties.

Once again, retirees will be hit hardest, having seen house prices rise for decades, especially in London, the South East and the more expensive parts of the country. There’s not much they can do to avoid it. Just sit and hope for the best.

This Budget will be one of the toughest ever and pensioners won’t know the full impact until 26 November. Until then, speculation will continue. Avoid sudden movements.