Rachel Reeves has reportedly paused her proposed changes to cash ISAs, amidst speculation that the Chancellor was planning a significant overhaul during her upcoming Mansion House speech.
A cash ISA is a savings account where individuals can save up to £20,000 each tax year, and any interest earned on savings is tax-free.
Previous reports indicated that the Government was considering lowering the cash ISA threshold to as low as £4,000 to encourage investments in stocks and shares ISAs instead.
Stocks and shares ISAs do not offer a fixed interest rate; instead, returns are based on stock market performance.
The Financial Times has reported that reforming cash ISAs is still under consideration, but Government officials seek additional time for consultation on the implementation. The Chancellor is scheduled to deliver her Mansion House speech next Tuesday.
Sarah Coles, head of personal finance at Hargreaves Lansdown, expressed that the cash ISA allowance remains unchanged for now, emphasizing the importance of thorough industry consultation before making any impactful changes.
Martin Lewis, founder of MoneySavingExpert.com, cautioned against reducing the cash ISA limit, a sentiment echoed by several building societies urging the Chancellor to maintain the current threshold.
Despite opposition, investment firms argue that encouraging investments in stocks and shares could benefit companies and the UK economy.
In a previous statement to the BBC, Rachel Reeves affirmed that she would not reduce the overall £20,000 ISA limit while emphasizing the need for better returns on savings, including considering equity investments.
Economic Secretary to the Treasury, Emma Reynolds, advocated for increased investments in the stock market over cash holdings.
For taxpayers, the savings interest tax allowance is £1,000 annually for basic-rate taxpayers, £500 for higher-rate taxpayers, and no allowance for additional rate taxpayers, after which interest is taxable.
Individuals would incur tax on interest earned over these thresholds.
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