Martin Lewis has urged cash ISA savers not to panic over fears the tax-free allowance could be cut in the future. The MoneySavingExpert.com founder explained how Rachel Reeves is looking at ways to reform the cash ISA.
A cash ISA is a type of savings account where you can save up to £20,000 each tax year and any savings interest you make will be tax-free. There are also other types of ISAs known as stocks and shares ISAs where your money is invested into shares in individual companies.
Instead of being given a set rate of interest, the rate of your return in a stocks and shares ISA is based on the performance of the firms you’re invested in. Earlier this year, Economic Secretary to the Treasury, Emma Reynolds, urged for more money to be invested in the stock market to help stimulate economic growth.
It was then confirmed in the Spring Statement this March that the Government is “looking at options for reforms” for the cash ISA – however, nothing has been announced yet. Even if changes were announced to the tax-free limit in the future, Martin Lewis explained that it wouldn’t impact any money you already have in a cash ISA.
Speaking in a new video published on social media, he said: “They’re talking about lowering the limit of how much money you could put in in future, so there’s no need to panic about your existing cash ISAs if the rumours are correct.
“As for when it starts, well, if it is announced in the Autumn Budget, there’s a chance it could start immediately so it would instantly lower your cash ISA allowance.
“Or there’s precedent for ISA changes for them doing the change, announcing it in autumn and starting it in the January or starting it in April 2026 – the new tax year.”
He added: “For me, what all this means is if you are planning to save into a cash ISA this tax year and you’ve got the money, getting the money in sooner would seem safer – in case there is a risk of the allowance being cut.”
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Savers have been more at risk of having to pay tax on interest they’ve made on their savings after rates improved over the past couple of years. But not everyone has to pay tax on savings interest.
If you’re a basic-rate taxpayer, you can earn £1,000 every tax year in savings interest before you need to pay tax. The threshold is £500 for higher-rate taxpayers, while additional rate taxpayers don’t get an allowance at all.
You would start to pay interest on the money earned from your savings once you earn above these thresholds. A document published after the Spring Statement read as follows: “The government is looking at options for reforms to Individual Savings Accounts that get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment, and support the growth mission.
“Alongside this, the government is working closely with the Financial Conduct Authority to deliver a system of targeted support to give people the confidence to invest.”
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