Budget 2025 latest: Rachel Reeves set to slash tax-free ISA limit in blow to savers

The weeks and months leading up to the budget announcement were full of rumors and speculation.

Here are some important announcements we expect the Chancellor to make:

Income tax thresholds will be frozen

Rachel Reeves is expected to liberalize income tax thresholds in her Budget rather than increase them directly. By not increasing the thresholds, it will take advantage of a process called “fiscal drift”, where people are dragged into paying tax for the first time or shifted to a higher rate as wages rise.

Reeves will impose ‘mansion tax’

Reeves could hit more than 100,000 of Britain’s most expensive properties with taxes in the Budget. The so-called “mansion tax” will apply to homes worth more than £2 million and could generate between £400 million and £450 million for the Treasury.

Freezing the individual savings allowance

Ms Reeves is also expected to freeze her personal savings allowance, according to The Telegraph. Similar to freezing tax thresholds, freezing the personal savings allowance could also cause people to “secretly” pay more tax. As savings increase, tax-free allowances do not increase either.

The Chancellor is said to be introducing limits on how much money employees can save in salary sacrifice schemes before they become subject to national insurance. Reports suggest it could cap this at £2,000 a year, which would reduce the amount people put into their pension funds.

Rachel Reeves is set to cut the annual cash ISA limit on her make-or-break budget from £20,000 to £12,000 in what could be seen as a blow to hard-working savers.

The Chancellor hopes to encourage more households to invest their savings in the UK stock market as he seeks to plug his £22bn financial black hole.

As it’s the last day before the Budget, Westminster is full of rumors and speculation.

However, things continue as usual in the room.

On: 11:30Wes Streeting will face health issues in the House of Commons.

Any time later 12:30Sir Keir Starmer will make a statement about the G20 in the House of Commons.

He will later meet with Ukraine’s European allies following recent talks to secure peace in the war-torn country.

Kate Devlin, The Independent’s Whitehall editor, reports:

The Chancellor tried to rally Labor MPs behind his budget in the few hours until he finally announced it.

He tried to impress them by insisting it would be “progressive” and talking about supporting the NHS.

But he also called on them to get behind it because “politics is a team sport.” Experts warn that a backroom revolt that scuppered £5bn worth of welfare cuts planned earlier this year has compounded Ms Reeves’ woes in this budget, leaving her forced to come up with billions of pounds more.

His speech also shows how important it is for the Chancellor to have the support of Labor MPs for his make-or-break budget, despite the party’s huge majority in the Commons.

Scottish Labor leader Anas Sarwar described the Budget as “a moment to restore confidence and get the Labor government back on track”.

Don’t write IndependentHe said: “Ultimately, both voters and businesses will benefit from the decisions taken by the UK Labor government.

“The tragedy is that failure to project confidence and communicate these changes leaves them feeling uncertain. But if we don’t take action to boost business confidence, then we will remain stuck in the doomed cycle of speculation, timidity and short-termism that is holding our economy back.”

Pre-packaged milkshakes and lattes are expected to be affected by the sugar tax, the Minister of Health announced.

Wes Streeting is expected to tell the House of Commons on Tuesday that the Government will remove the exemption for milk-based drinks from the current tax on sugary drinks.

The move will affect packaged milkshakes and coffees, but not drinks made in cafes and restaurants.

This follows a Government consultation on the issue, which aimed to remove the exemption for milk-based drinks and introduce a “lactose allowance” that would take into account the natural sugars in the milk component of drinks.

Ministers are also exploring removing the exemption for milk replacer drinks that contain “added sugar” beyond sugars from the main ingredient, such as oats or rice.

The Chancellor’s second budget has been overshadowed by gloomy forecasts, but he still must deliver, even as the OBR downgrade reveals the fragility of Labour’s economic promises and the limits of the government’s turnaround.

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Rachel Reeves is set to cut the annual cash ISA limit on her make-or-break budget from £20,000 to £12,000 in what could be seen as a blow to hard-working savers.

The Chancellor hopes to encourage more households to invest their savings in the UK stock market as he seeks to plug his £22bn financial black hole.

Sources familiar with Wednesday’s Budget preparations said: Finance Times It was stated that Reeves initially planned to reduce the limit to £10,000, but increased the figure after months of fierce debate.

British households are estimated to have a total of £360bn tied up in cash ISAs, according to a cross-party Treasury select committee report produced last month, with many opting for tax-free accounts over riskier investments in stocks and shares.

Money put into stocks and shares ISAs fell by 9 per cent between 2021-22 and 2023-24, while injections into cash ISAs more than doubled.

The Chancellor is said to be considering a number of proposals to overhaul the ISA system, including a ‘Brit ISA’ that would require a minimum allocation of 20 per cent to UK shares. However, he is said to have abandoned the plan after a backlash from ISA providers.

Rachel Reeves will deliver her highly anticipated Budget this week.

The Chancellor will make his announcement in the House of Commons on Wednesday, November 26.

It will start after PMQs, which usually end around 12.30pm.