An influential group of MPs have warned the government that cutting the annual allowance for cash ISAs could backfire in several ways. Speculation has been mounting for months that the Chancellor could lower the annual limit on tax-free savings – possibly from \u00a320,000 to \u00a310,000.<\/p>\n
The government hopes to instead encourage savers to invest in stocks and shares ISAs, which can offer higher long-term returns and improve financial health. However, the finance committee says cutting emissions allowances would be unlikely to achieve this – and could lead to higher prices for consumers.<\/p>\n
Building societies rely on ISA cash savings to fund mortgage loans – and a decline in deposits could lead to higher interest rates or fewer products on the market. Committee chairwoman Dame Meg Hillier said \u201cwe are a long way away\u201d from achieving a culture where significant numbers of Britons invest in the stock market. \u201cThis is not the time to lower the cash ISA limit,\u201d she warned.<\/p>\n
Surveys suggest that if allowances are reduced, consumers may be able to move their cash to alternative savings accounts where they would have to pay tax on interest. Charlotte Harrison, managing director of a financial group, previously warned: "Building societies, which finance over a third of all first-time buyer mortgages, rely on retail deposits such as cash ISAs to fund their loans." \u201cIf ISA inflows fall, the cost of funding is likely to rise, and that means mortgages could become both more expensive and more difficult to access.\u201d<\/p>\n
The latest figures suggest that two-thirds of contributions to ISAs went into cash accounts in the 2023\/24 tax year – totaling \u00a3360 billion. An estimated 14.4 million consumers save exclusively in a cash ISA, with the average balance at \u00a36,993.<\/p>\n
Chancellor Rachel Reeves said: \u201cCurrently, returns on savings and pensions are often lower than in comparable countries around the world.\u201d \u201cI want to make sure that people who are saving for the future are getting a good return on those savings.\u201d The committee’s warning comes amid speculation about whether Ms Reeves will increase income tax in next month’s budget – a key Labor manifesto promise broken.<\/p>\n
Newspaper reports suggest the basic rate of income tax could be increased by 1p to 21% for the first time since the 1970s. This could raise around \u00a38 billion and help close a black hole in the country’s finances, but risks putting consumers under further pressure as the cost of living crisis continues. A 1p increase in higher income tax to 41% is also thought to be under consideration, but this would only add \u00a32bn to the exchequer.<\/p>\n","protected":false},"excerpt":{"rendered":"
Warning Over Cutting Annual Allowance for Cash ISAs An influential group of MPs have warned the government that cutting the annual allowance for cash ISAs could backfire in several ways. Speculation has been mounting for months that the Chancellor could lower the annual limit on tax-free savings – possibly from \u00a320,000 to \u00a310,000. Government’s Objective<\/p>\n","protected":false},"author":1,"featured_media":26215,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[36],"tags":[16700,16696,16698,12140,2538,16699,13301,405,16697,66,512,3772,9186,1428,752,3260],"class_list":{"0":"post-26214","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"tag-black-hole","9":"tag-building-society","10":"tag-charlotte-harrison","11":"tag-cost-of-living","12":"tag-finance","13":"tag-first-time-buyer","14":"tag-income-tax","15":"tag-interest","16":"tag-meg-hillier","17":"tag-money","18":"tag-mortgage","19":"tag-rachel-reeves","20":"tag-stock","21":"tag-stock-market","22":"tag-tax","23":"tag-wealth"},"_links":{"self":[{"href":"https:\/\/nanamedia.org\/en\/wp-json\/wp\/v2\/posts\/26214","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/nanamedia.org\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/nanamedia.org\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/nanamedia.org\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/nanamedia.org\/en\/wp-json\/wp\/v2\/comments?post=26214"}],"version-history":[{"count":1,"href":"https:\/\/nanamedia.org\/en\/wp-json\/wp\/v2\/posts\/26214\/revisions"}],"predecessor-version":[{"id":26216,"href":"https:\/\/nanamedia.org\/en\/wp-json\/wp\/v2\/posts\/26214\/revisions\/26216"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/nanamedia.org\/en\/wp-json\/wp\/v2\/media\/26215"}],"wp:attachment":[{"href":"https:\/\/nanamedia.org\/en\/wp-json\/wp\/v2\/media?parent=26214"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/nanamedia.org\/en\/wp-json\/wp\/v2\/categories?post=26214"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/nanamedia.org\/en\/wp-json\/wp\/v2\/tags?post=26214"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}