Chancellor Rachel Reeves is poised to deliver a significant blow to savers across the UK with a planned cut to the popular Cash ISA allowance in tomorrow's Autumn Budget.
What's Changing for Your Savings?
The Chancellor will outline the second Labour Party government budget on Wednesday, November 26. A key expected announcement is the reduction of the annual tax-free Cash ISA allowance. Currently, Britons can save up to £20,000 each year without paying tax on the interest. This limit is anticipated to be slashed to just £12,000.
This represents a substantial £8,000 reduction in the amount savers can shield from tax, a move that has drawn sharp criticism from financial experts.
Expert Warns of Negative Consequences
Antonia Medlicott, Founder and Managing Director at financial education specialists Investing Insiders, has voiced strong concerns about the Chancellor's strategy. She expressed disappointment that the rumoured cut is proceeding, stating it will "spell bad news for savers across the board."
Medlicott explained that Cash ISAs have long served as a reliable refuge for individuals building emergency funds or saving for personal goals. She argues that undermining this tool risks discouraging the very habit of disciplined saving that is crucial during uncertain economic times.
Contrary to the government's apparent goal of encouraging investment, Medlicott suggests the cut could have the opposite effect. "This may not be the best time to push people who prefer stability into risk," she cautioned, referring to the expected market turbulence following the budget. She believes simply cutting the cash allowance is ineffective without simultaneously educating people on how to invest.
What Can Savers Do Now?
For those impacted by this change, Antonia Medlicott offers a potential solution. She advises savers to explore Stocks and Shares ISAs, where the annual allowance is expected to remain untouched. This provides an alternative avenue for tax-efficient growth, though it involves accepting a higher level of risk compared to cash savings.
With the Autumn Budget announcement imminent, millions of UK savers are awaiting confirmation of this policy, which could significantly alter their financial planning for the year ahead.
