Millions of savers face 'punishing new tax' as Reeves' ISA allowance cut could cost up to £5,132
Millions of savers could be hit with a "punishing new tax" as Chancellor Rachel Reeves considers cutting the tax-free allowance for Cash ISAs. The proposed changes, which could see the annual limit drop from £20,000 to just £4,000, have sparked fears that households may lose out on thousands in tax-free interest.Some 1.2million Scots could be hit by proposed changes, losing thousands of pounds, the SNP has said.Savers could lose up to £5,132 to tax over a five-year period if the allowance is reduced to £4,000 a year – assuming there is a five per cent interest rate and annual deposits of £16,000, research commissioned by the SNP found.Martin Lewis, the MoneySavingExpert has already expressed concern, while building societies report being "inundated" with worried customers.There have even been rumours the tax-free allowance could be scrapped altogether.Dave Doogan, SNP economy spokesman MP said: “The Labour Party must ditch its damaging plans to impose a punishing new tax on savers, which would clobber more than a million Scots and could cost many households hundreds or thousands of pounds.“This is yet another broken promise from the Labour Government, who said they wouldn’t increase taxes on families but are now dipping their fingers into people’s hard-earned savings.”Cash ISAs are individual savings accounts that allow people to earn interest without being taxed.House of Commons Library research shows 25 per cent of Scottish adults currently have cash ISAs.LATEST ISA DEVELOPMENTS:Labour minister REFUSES to rule out new tax hikes as Rachel Reeves plans major spending cutsReeves urged to reform ISA rules to get 'more money flowing into UK' by raising tax-free savings allowanceSpring Statement 2025: From ISA changes to inheritance tax - what to expect from Rachel ReevesScottish savers are thought to have £52.7 billion in ISAs, with an average of £39,917 per account.Reeves has spoken of wanting to foster "a culture in the UK of retail investing like what you have in the United States".However, Doogan pointed out that the UK already ranks low among European countries for household savings.While the UK's figure stands at just two per cent, countries like France, Germany and the Netherlands all save above 10 per cent of household disposable income.He said: "Voters were promised things would get better but under the Labour Government the cost of energy, food and living is soaring."The tax-free allowance for cash ISAs should not be cut and people should not be forced into riskier or most costly savings products."He added: "The UK economy is stagnating, unemployment is rising, and now the Chancellor wants to slash people’s savings too. It stinks."
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Millions of savers could be hit with a "punishing new tax" as Chancellor Rachel Reeves considers cutting the tax-free allowance for Cash ISAs.
The proposed changes, which could see the annual limit drop from £20,000 to just £4,000, have sparked fears that households may lose out on thousands in tax-free interest.
Some 1.2million Scots could be hit by proposed changes, losing thousands of pounds, the SNP has said.
Savers could lose up to £5,132 to tax over a five-year period if the allowance is reduced to £4,000 a year – assuming there is a five per cent interest rate and annual deposits of £16,000, research commissioned by the SNP found.
Martin Lewis, the MoneySavingExpert has already expressed concern, while building societies report being "inundated" with worried customers.
There have even been rumours the tax-free allowance could be scrapped altogether.
Dave Doogan, SNP economy spokesman MP said: “The Labour Party must ditch its damaging plans to impose a punishing new tax on savers, which would clobber more than a million Scots and could cost many households hundreds or thousands of pounds.
“This is yet another broken promise from the Labour Government, who said they wouldn’t increase taxes on families but are now dipping their fingers into people’s hard-earned savings.”
Cash ISAs are individual savings accounts that allow people to earn interest without being taxed.
House of Commons Library research shows 25 per cent of Scottish adults currently have cash ISAs.
LATEST ISA DEVELOPMENTS:
- Labour minister REFUSES to rule out new tax hikes as Rachel Reeves plans major spending cuts
- Reeves urged to reform ISA rules to get 'more money flowing into UK' by raising tax-free savings allowance
- Spring Statement 2025: From ISA changes to inheritance tax - what to expect from Rachel Reeves
Scottish savers are thought to have £52.7 billion in ISAs, with an average of £39,917 per account.
Reeves has spoken of wanting to foster "a culture in the UK of retail investing like what you have in the United States".
However, Doogan pointed out that the UK already ranks low among European countries for household savings.
While the UK's figure stands at just two per cent, countries like France, Germany and the Netherlands all save above 10 per cent of household disposable income.
He said: "Voters were promised things would get better but under the Labour Government the cost of energy, food and living is soaring.
"The tax-free allowance for cash ISAs should not be cut and people should not be forced into riskier or most costly savings products."
He added: "The UK economy is stagnating, unemployment is rising, and now the Chancellor wants to slash people’s savings too. It stinks."
