Chancellor Rachel Reeves could target Individual Savings Accounts (ISAs) in the Budget next week after it emerged she previously floated a lifetime limit on the tax-free accounts.
Ms Reeves called for a £500,000 limit on the amount that savers could put into the tax-free wrappers in an article for The Independent in 2016 – sparking fresh fears she could make changes to the ISA regime.
Savers and investors have a £20,000 annual allowance to channel into ISAs every year. They are very popular, with 12.5million adult ISA accounts subscribed to in 2022-2023, figures show.
Jason Hollands, of wealth manager Evelyn Partners, said: ‘Meddling with ISAs would be quite dangerous for any Chancellor to do. It would very visibly be something that would not be popular.’
Currently, there is no lifetime limit. However, if one was introduced it could spell the end of investors accruing seven-figure tax-free sums inside the wrappers.
Rachel Reeves could target Individual Savings Accounts in her Budget next week after previously floating the idea in an article in 2016
The number of ISA millionaires has tripled in just three years, data obtained by investment platform Invest Engine shows.
More than a quarter of a million people have at least £250,000 in their ISA, with 30,000 of these savers holding between £500,000 and £750,000.
A lifetime cap is likely to affect modest savers as well as wealthy investors.
If an investor put just half of the current annual allowance into an ISA every year on the first day of the tax year for 25 years, then they would breach a £500,000 cap, Hargreaves Lansdown says. This assumes the pot grows by 5 per cent a year.
Currently there is no lifetime limit on ISA amounts savers can put into tax-free wrappers, but Ms Reeves previously suggested introducing a cap of £500,000
Sarah Coles, from Hargreaves Lansdown, said: ‘It runs the risk that it affects those who are considering investing.’
When Ms Reeves wrote the article in 2016, the ISA limit was just £15,000. She said the Government should introduce a ‘lifetime allowance of £500,000 for ISA investments and freeze the annual limit at £15,000 for the remainder of this parliament’.
She added the Government should match the first £100 that each saver puts in an ISA for basic rate taxpayers.
A spokesman for the Treasury said: ‘Decisions on tax are made in the round at the Budget.’
