Major Rachel Reeves ISA changes delayed after flaw revealed | Personal Finance | Finance

While the contribution threshold for stocks and shares ISAs was intended to remain at current levels, the plan included a new 22% tax on interest earned on cash balances held in these investment accounts. But the plans came to a halt after it emerged it would allow savers to escape Ms Reeves’s grip on cash.

Without The Telegraph’s discovery, savers could have avoided tax by investing a minimum amount (say 1p) in stocks and shares ISAs and keeping the bulk of their savings in cash-mimicking instruments such as money market funds, which offer low-risk, cash-like returns. Although the ISA reforms are aimed at encouraging investment, experts have warned that the complexity introduced by new “anti-circumvention” rules could ultimately backfire.

Anyone who wants to open an ISA must be at least 18 years old. These are a special type of savings or investment account available in the UK that protect your interest and investment returns from income tax and capital gains tax. Users can currently save or invest up to £20,000 a year and, unlike regular savings accounts, the money remains tax-free.

But industry figures warned the complexity would both create administrative problems and deter people from opening ISAs, instead creating an “investor nation”.

Shadow Chancellor Sir Mel Stride also warned that confusion about the rules risked “leaving people in the dark”.

Tom Selby, director of public policy at AJ Bell, said: “We can only hope that any delays are due to authorities realizing that creating new tax charges for Isa investors and incurring heavy complexity is unnecessary and exactly the wrong way to promote a retail investment culture in the UK.”

The move is thought to risk undoing reforms made in 2014 to simplify the ISA system, which led to a 45% increase in ISA contributions in its first year.

A Treasury spokesman said: “The vast majority of savers will continue to pay no tax on their savings and the Treasury and HMRC are working at pace with the industry on detailed rules and will update on next steps in due course.”