Rachel Reeves to cut annual cash Isa limit to £12,000 in Budget
https://www.ft.com/content/c134a925-7edb-4cff-bc9c-ea5563a753eb
Posted by SojournerInThisVale
Rachel Reeves to cut annual cash Isa limit to £12,000 in Budget
https://www.ft.com/content/c134a925-7edb-4cff-bc9c-ea5563a753eb
Posted by SojournerInThisVale
23 Comments
Hopefully, this encourages people to use the stocks and shares ISA instead even if just for low-risk money market funds.
And it will never rise again, just like the allowances for CGT and interest
Any chance of copy and pasting the article? The link the bot provides still has the paywall.
Tax free ISAs are so that working families can build wealth. Doubt this will raise any tax tbh.
Chancellor Rachel Reeves will cut the annual cash Isa limit to £12,000 in her Budget as she attempts to push savings into the UK stock market.
People close to preparations for Wednesday’s Budget said Reeves had decided to reduce the limit from the current level of £20,000 but slightly higher than the £10,000 cap that had been considered.
But the chancellor has dropped plans for a voluntary type of “Brit Isa” that would have had a minimum allocation of 20 per cent to UK equities, following a backlash from Isa providers and the UK’s Investment Association trade body.
The overhaul to Britain’s Isa regime expected in Wednesday’s Budget comes as the government attempts to funnel more cash into London-listed stocks following a dearth of corporate flotations and a defection of companies to US markets.
The announcement on Wednesday will follow months of fierce debate in the City over plans to cut the cash Isa limit and devise a “ready made” stocks-and-shares Isa with a minimum holding of UK equities, which would have been offered on a voluntary basis.
After weeks of consultation with the industry, Reeves concluded that there was little support for the creation of a new “Brit Isa”, not least because many established players already had strong UK weightings in their products.
One person involved in the negotiations said: “The idea had a poor reception and there was a general feeling that we didn’t really need to do it.”
Why would cutting the cash Isa limit hit mortgages?
Investment sites, which offer Isas among other products, told the Financial Times that they were concerned about having to hold a minimum level of UK stocks rather than allocating money according to risk and other market factors, and how this would undermine regulation.
But there are still concerns over cutting the limit. Tom Selby, director of public policy at AJ Bell, said there was “scant” evidence that cutting the cash allowance would incentivise people to invest, including in UK companies.
However, he added: “The desire to support the ailing UK stock market is understandable and it is at least positive the government hasn’t gone down the road of implementing a pointless, fundamentally flawed ‘UK Isa’.”
Reeves is expected to make other adjustments to Britain’s savings regime in the Budget and the overall net impact on the exchequer of the reforms, including the new Isa regime, is said to be broadly revenue neutral.
The Treasury declined to comment.
It’s a tax grab, most people who have lots of money in cash isas are older where stocks and share isa’s make less sense as you don’t have the time to invest for decades.
Seems like a sensible move. Reeves is obviously trying to get investment in UK business.
I’ve got 13% returns from ETF’s this year so far on my stocks and shares ISA. Unfortunately I think a significant portion of the UK public are very risk averse.
£21,000 always seemed incredibly generous, that is an insane amount of surplus income a year.
I agree with Martin Lewis on this. In that they are going about it the wrong way. People who are adverse to risk won’t suddenly go “oh I will put it in the stock market now then” they simply won’t.
If the Government wanted people to change you use a carrot. What the Gov is doing is the stick approach and it simply won’t work.
Would this come into effect immediately, or at the start of the next tax year?
When my mum died I was left with some money. I put it in a cash ISA. I’ve now spent most of it. I’ll get some more when we sell her house. I guess I’ll have to read some Martin Lewis articles because I have no idea about stocks and then shares. I do know that my Dad lost most his pension in 2008 though.
If the government wants people to invest in the LSE, they need to encourage companies to list there. At the very least a dual listing – not sure why they don’t make this mandatory for British companies that have listed elsewhere.
How this cut affects budget? It’s already taxed money just possible (not guaranteed) gains are tax free.
Is this just to encourage UK investment? Why else punish the average person
* It’s an indirect wealth tax. The people who could max out the £20k limit per person are already sitting on a lot of excess wealth that they can lock away from the taxman year on year. Most people without comfortable levels of wealth will struggle to max out the £12k per person threshold.
* It’s however a really stupid way to incentivise people into stocks and shares, especially without education to keep people away from risky adjacent things like meme stocks or crypto. Plus there’s that lovely stamp duty on S&S ISAs.
No issue with this. Any long term investment should be in equities (it’s very easy to buy a cheap global tracker these days). £12k is still generous for the risk averse.
The only thing this will do is push providers to offer increased interest on cash holdings in stocks and shares isas.
I’m waiting until Wednesday to get my Budget news. So sick and tired of seeing how Rachel Reeves is supposedly going to gut punch every group you can think of…
Looks like my excess cash is going into Premium Bonds then…
Need to change the rules around transfers as currently you can put £20k in a stocks and shares isa or cash isa and transfer between the two.
Currently got my savings in cash ISA, plan was to hit the 20k in 3 years, with balance and monthly savings going into it.
Maybe going to have to bare more risk and get into a S&S ISA next year.
So how will this work? As I understood it the 20k ISA limit is “global” (as in, you can put £4k into your LISA, then have 16k left for other ISAs)
Does this mean after the 4k LISA allowance is used, you’ll only have 8k cash isa left? And is stocks and shares 20k allowance going to be separate?
It should probably just be 10k (or up the overall limit to 24k), “half and half” is really easy to understand.
But I have no issue with this. How many people have a spare £20k/year to put into an ISA anyway? It’s a tax break for upper middle class people, and I don’t think we need people to save more.
I do think there should be some requirement for equity ISAs to invest in British business though.