The Government has ruled out retrospective changes to cash Isas in any scenario, This is Money understands.
It means money already stashed in a cash Isa will not be subject to any rule changes set to be announced by Rachel Reeves next Tuesday.
It is widely expected the Chancellor will use her Mansion House speech to announce a cut to the cash Isa allowance.
Savers can currently save up to £20,000 a year into cash Isas with all the interest earned on savings being free from tax. But it is thought that could be cut to £5,000 or £4,000 a year.
This would see the amount that can be put into a cash Isa slashed to less than a fifth of its current level and mean many savers will pay more tax on the interest they earn on their cash as a result.
The Government has promised not to retrospectively tinker with tax-free cash Isas
Those who use a stocks and shares Isa to invest will still be allowed to contribute up to £20,000 in each tax year.
The Government is on a drive to get more savers investing so they can benefit from the long-term financial security and returns of investing and to boost the British economy.
It is keeping all aspects of savings policy under review as Chancellor Rachel reeves scrambles to fill a black hole in the country’s balance books.
While it was never rumoured that any retrospective changes were on the cards, many This is Money readers have written in worried about the Chancellor coming after pots already salted away in the tax-free wrapper.
Any changes to cash Isas are unlikely to come in to force until April 2026.
There has been widespread backlash to the alleged changes to the cash Isa allowance from savers and saving industry figures alike.
The Building Societies Association has penned a letter to the Government warning restrictions imposed on cash Isas could have unintended consequences on the housing market.
Namely, reducing funding for lending, driving up mortgage prices and triggering a housing market downturn.
‘This,’ it says, ‘would undermine efforts to stimulate economic growth, including the Government’s commitment to delivering 1.5million new homes’.
A Treasury spokesman said: ‘We recognise the important role that cash savings play in helping households build a financial buffer for a rainy day.
‘Our ambition remains to ensure people’s hard-earned savings are delivering the best returns and driving more investment into the UK economy.’
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