Chancellor of the Exchequer Rachel Reeves is expected to announce a cut to the Cash ISA allowance in July’s Mansion House speech.
With UK stock’s popularity waning and a drought of private companies listing on the stock market, the Chancellor is hoping the move will spur savers to invest in British companies instead.
All eyes will be on her Mansion House speech on 15 July for the finer details, but if speculation is correct, we’re likely to see a reduced Cash ISA allowance – however, no change to the overall ISA allowance of £20,000.
But what does this mean for savers and what can you do about it right now?
This article isn’t personal advice. If you’re not sure if an action is right for you, ask for advice. Remember, ISA and tax rules can change, and benefits depend on individual circumstances.
A big ISA shake up – what could it mean for savers?
Cutting the Cash ISA allowance would be one of the biggest shake ups in the ISA market since their birth in 1999.
It could also have a knock-on effect with lenders, as banks with lower cash deposits can lend less money out for products like mortgages.
For savers, Cash ISAs are often a first port of call when people are starting out, and they’ll often gradually move over into investments as they find their feet.
Reducing the allowance means savers have less available to transfer into Stocks and Shares ISAs when they become comfortable with investing – effectively reducing investments rather than boosting them.
This is an issue which requires a carrot and not the stick approach.
The barriers to investing are typically behavioural, so it's through encouragement and increased confidence that could increase the number of retail investors in the stock market.
This week’s announcement of radical changes to how financial firms are allowed to communicate with clients, through targeted support and changes to the boundary between financial advice and guidance, is a major breakthrough in supporting people to make the first step towards investing.
What can savers do now? – Plus how to find great Cash ISA rates
If you’re looking to use your Cash ISA allowance, now is the best time to do it.
No cut has been confirmed yet, so it’s best to work with what we know right now, which is the current ISA allowance of £20,000.
If you’re looking for great Cash ISA rates, there are still lots of rates available above 4%, above the latest inflation rate of 3.4%.
But it’s worth shopping around to try and get the best rates you can.
Here’s where the HL Cash ISA can help.
You can manage your Cash ISA portfolio with multiple banks all on a single online platform – so you can see everything in one place.
It also lets you spread your money across fixed-rate, easy-access, and limited-access products.
You can then manage it alongside your savings and investment accounts, all through one log in.
Just remember, products in the HL Cash ISA can be added or withdrawn at any time.
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Article image credit: WPA Pool / Pool.
