Martin Lewis cash ISA ‘sooner than later’ action advice over ‘tax raid’ | Personal Finance | Finance
Money Saving Expert founder Martin Lewis has urged people to take urgent action over cash ISAs amid rumours of potential tax raid by chancellor Rachel Reeves. Writing in the new email alert from the MSE website, Mr Lewis said some are saying that the annual ISA allowance could be cut from ÂŁ20,000 down to ÂŁ4,000 âwhich makes it all the more important to use up new allowances sooner than laterâ.
The new tax year started on April 6 and said people have a limited opportunity to pile in while rates are high. He said: âSo youâve a brand new ÂŁ20,000 ISA allowance to shelter savings & investments from tax. I know I talked about this a fortnight ago, but that was so last (tax) year.
âYet while the tax year is new, âISA seasonâ is already getting old – weâre close to the end of the usual short period where firms boost ISA deals to win business while demand is high.â
He said that if the Chancellor did decide to cut the rate then it would âprobablyâ happen in the Autumn budget. The documents alongside the Spring Statement said the government wants to get the âbalance rightâ between cash and equities in ISAs as part of efforts to push through a retail investing revolution. It means a change to the status quo is being considered ahead of the Budget later this year, with Labour having already committed to ISA simplification and encouraging greater use of Stocks and shares ISAs during the general election campaign.
Mr Lewis said on the MSE site: âThe Chancellor has been evaluating cutting the cash ISA allowance – rumours say to as low as ÂŁ4,000 – and if that does happen, itâs thought itâd likely be announced in the Autumn Budget (though with so much current uncertainty, anything could or couldnât happen, at any time).
âThe concept behind it is that itâd encourage people to put the money in shares ISAs instead (personally, Iâm sceptical if itâd work – many will just keep saving but pay more tax). Of course, everything is pure supposition – I doubt any firm decision has been made yet.
âBut if it happens as rumoured, it WOULDNâT impact money already in cash ISAs, itâd just cut what you can put in, in future. Whether itâd start immediately, or in January or April 2026, no one knows (including at this point, I suspect, Rachel Reeves). Yet if you plan to save in a cash ISA, all of this would suggest getting it in sooner would seem safer.â
Mre Lewis explained people should use ISAs because they allow people to make sure savings interest is tax-free. Each tax year, every UK adult currently gets a ÂŁ20,000 ISA allowance to put money away tax-free in savings via a top cash ISA, or in investments via a shares ISA.
He added: âIf you donât use this yearâs ISA allowance, you lose it when the tax year ends (ie, it canât be carried over), which will be 5 April 2026 for this tax year. Yet once itâs in an ISA, it stays tax-free year after year, so some whoâve maxed out every yearâs allowance have ÂŁ100,000s protected from tax.â
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