Cash ISAs remain a top choice among savings products, allowing individuals the opportunity to save up to £20,000 annually without incurring tax.
However, amidst rumours that the government might clamp down on Cash ISA accounts due to revenue deficits from taxes, Martin Lewis has stepped in to quash concerns regarding the future of these tax-free savings vehicles.
At present, savers can invest £20,000 each year into an ISA, or divide it among several ISAs, hitting a collective maximum of £20,000. With anxiety mounting over the possibility that Chancellor Rachel Reeves could slash Cash ISAs to amplify tax proceeds, Martin Lewis provided an important update via X to those with funds in a Cash ISA.
He shared: “A lot of people are asking me ‘what’s the news with ISAs thresholds, are they being cut?’
“The answer is there is no news, there’s lots of speculation written up as news, but absolutely zilch has been announced. In fact I doubt anything has been decided yet, though it is being discussed.”
He went on: “To those asking should I take money out of ISAs. If there are changes it will almost certainly – nothing’s 100 per cent – be on how much you can contribute in future.
“It would be very unlikely to impact any money already in cash ISAs. So don’t do any panic moves, just keep going, nothing has happened.”
Stocks and shares ISAs offer savers the opportunity to invest money without incurring Capital Gains Tax on any growth, while Cash ISAs provide a tax-free haven for savings interest. Most individuals are entitled to the Personal Savings Allowance, which permits up to £1,000 of interest to be earned tax-free within a tax year.
However, this allowance drops to £500 for those earning £50,000, and disappears entirely for those with an income of £125,000 or more, reports the Express.
For savers accruing 4-5 per cent interest, it’s easy to exceed these tax thresholds with just £10,000 to £20,000 saved in a single year, depending on your income bracket.
Therefore, Cash ISAs serve as an effective shield against paying tax on any interest earned beyond these limits.