Reeves should not cut cash ISA allowance, MPs say

A coalition of MPs has strongly advised that Chancellor Rachel Reeves should not cut the cash Isa tax-free allowance in the forthcoming Budget. According to the Treasury Select Committee's survey, cuts to the tax-free allowance were unlikely to have the intended effect of encouraging an investment culture in the UK. In next month's Budget, Reeves is expected to announce tax hikes or budget reductions, and is apparently considering changes to cash Isas.

My understanding is that the report states that changes to Isas shouldn't be made in isolation of other policies,

the chancellor said. In November, I'll be determining any tax changes in the budget. Of course, we have to strike the right balance.

"At the time, often returns on savings and returns on pensions are lower than in comparable countries around the world, and I do want to make sure that when people put money away for the future, they get good returns on those investments.

Earlier this year, the chancellor was reported to be considering a cut to the allowance for tax-free cash savings in an attempt to encourage people to invest in stocks and shares rather than raising the economy. Following strong resistance from banks, building societies, and consumer campaigners, those plans were suspended. To keep the returns from being taxed, Savers can invest up to £20,000 per year in Isas in savings and investments. The chancellor has stated that she intends to keep this limit in place, and that it will now be dispersed across many categories, including cash Isas and stocks and shares Isos. The proposed modification specifically pertains to cash Isas, and the Financial Times announced earlier this month that the chancellor was considering lowering their tax-free amount to £10,000. The intention of this would be to attract investment. According to a recent report, the chancellor is facing a £22 billion budget deficit. In order to comply with her self-imposed fiscal laws of not borrowing to fund day-to-day spending and to keep government debt as a share of national income by the end of this parliament, she is likely to raise taxes or cut spending in her November Budget in order to achieve her selfimposed fiscal requirements of not borrowers to fund government spending and a piece of national Cash Isas are the most commonly used type of Iso. In cash Isas around the world, a total of £360 billion is held. According to the committee's report,

cutting the cash Isa allowance is unlikely to incite people to invest their money in stocks and shares.

This is not the time to reduce the cash Isa limit,

Treasury Select Committee Chair Dame Meg Hillier said.

The Committee is firmly behind the chancellor's proposal to establish a culture in the United Kingdom where savers are responsible investing their money and receiving better returns by making well informed financial decisions,she said.We're a long way from that point.

The government should instead focus on

a broad effort to truly enhance financial literacy and provide accessible, high-quality financial advice and guidance for individuals,

Dame Meg said.

Without this, I am concerned that the Chancellor's attempts to reform the UK's investment culture will not achieve the reform she wants, rather than hitting savers and mortgage borrowers.

Reducing the tax-free allowance for cash Isas would undoubtedly be unpopular among many savers, particularly older ones who are reluctant to take risks with their money.

The emphasis should be on improving financial literacy rather than lowering the cash Isa tax-free limit. The committee recommended that people make informed decisions with their money

so that people can make informed choices with their investments. According to the study, cutting the allowance would have negative knock-on effects for consumers, as building societies are dependent on cash Isas for their mortgage financing.