Rachel Reeves poised to announce cash Isa cut
Chancellor Rachel Reeves is expected to announce a cut to the annual tax-free cash Isa allowance.
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Savers can currently put £20,000 a year into tax-free Isas and can choose to split the limit how they like between cash accounts and investments.
But it has emerged Rachel Reeves wants to reduce the £20,000 cap on the amount that can be shielded from tax in cash Isas each year.
City bosses have reportedly already urged her to reduce the allowance to as little as £4,000.
The chancellor could unveil the changes during her speech at Mansion House on July 15, when she is due to set out the government’s growth and competitiveness strategy for the financial services industry.
She has previously said: “I’m not going to reduce the £20,000 Isa limit, but I do want people to get better returns on their savings, whether that’s in a pension or in their day-to-day savings.”
The hope is that slashing the £20,000 limit will encourage people to invest instead, potentially boosting the stock market.
Charles Hall, a longstanding backer of reform to the limit, told City AM: “It makes sense for the Chancellor to address the limits on Cash ISAs to encourage savers to invest in products with higher returns.
However there is concern the change would simply have a ‘negative’ impact on savers without people actually investing elsewhere.
Research carried out by investment platform AJ Bell found that just one in four savers would channel additional funds into other investments and that the Isa allowance “forms a key part of many people’s savings”.