A cash ISA allows you to save up to £20,000 each tax year and any interest earned is always tax-free- but reports have suggested Rachel Reeves could axe or reduce this tax-free allowance
Martin Lewis has urged cash ISA savers to “keep going” as normal despite speculation that Rachel Reeves is under pressure to reform the popular savings product.
A cash ISA allows you to save up to £20,000 each tax year and any interest earned is always tax-free. Bank of England data shows 2024 was a record year for cash ISAs, with savers stashing away almost £49.8billion in these accounts.
It comes after savings rates improved, which means savers have been more at risk of having to pay tax on interest they’ve made on their hard-earned cash. If you’re a basic-rate taxpayer, you can earn £1,000 every tax year in savings interest before you need to pay tax.
The threshold is £500 for higher-rate taxpayers, while additional rate taxpayers don’t get an allowance at all. You would start to pay interest on the money earned from your savings once you earn above these thresholds. In a post published on X/Twitter, Martin Lewis assured savers that no changes to ISAs have been announced.
There is speculation that Ms Reeves is being urged to axe or reduce the cash ISA tax-free savings allowance – but at this stage, the Treasury has not confirmed if anything will actually happen. Martin Lewis said: “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). To those asking should I take money out of ISAs. If there are changes it will almost certainly (nothings 100%) 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.”
It comes after Economic Secretary to the Treasury, Emma Reynolds, urged for more money to be invested in the stock market to help stimulate economic growth. Ms Reynolds asked a House of Lords committee: “Why do we have hundreds of billions of pounds in cash Isas?… What can we do together in parliament about trying to drive an investment culture that realises cash is not a good investment, especially in a high-inflation environment?”
In a statement given to The Mirror, a Treasury spokesperson said: “We want to help people save for their future goals and build greater financial resilience across the country. We keep all aspects of savings policy under review.”
