Rachel Reeves set to cut annual cash ISA limit to £12,000 in Budget
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.
It comes as Ms Reeves seeks to fill a major gap in public finances in her eagerly anticipated Budget on Wednesday. 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.
It is also said to reduce the two-child benefit limit and impose a new mansion tax on more than 100,000 high-value properties, in a move dubbed the “mansion tax”.
Opposition leaders were quick to criticize the ISA plans, accusing Ms Reeves of launching a tax raid on savers. Tory Shadow Chancellor Sir Mel Stride said: Mail: “Hard-working savers should not face a tax raid to fund Labour’s dependence on more welfare spending.
“The Conservatives have warned that tax rises will come after Rachel Reeves loses control of her finances. Cutting the Cash ISA allowance will hit millions of responsible people trying to achieve financial security, especially in uncertain times.
“Labour should be supporting savers, not making them pay for the Chancellor’s failures.”
