Plans to cut £20k tax-free allowance for cash ISAs shelved by Rachel Reeves amid backlash
It had been speculated that Rachel Reeves would announce the major change to the savings accounts, which currently offer tax-free interest on up to £20,000, in her Mansion House speech on July 15.
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However, it's understood that the Chancellor has now scrapped the plans following backlash from banks, building societies and campaigners, and will instead focus on encouraging more people to invest in stocks and shares.
Welcoming the move, Nottingham Building Society chief savings officer Harriet Guevara, said: 'This is positive news for savers and for lenders.
'We've consistently made the case, alongside others across the mutual and building society sector, for maintaining the full allowance, and welcome any decision to consult further with industry rather than rush through damaging reform that would disincentivise saving.
'Cash ISAs remain a vital tool for millions to build financial resilience over time, particularly in the current economic climate.
'Our data shows more than half of our fixed ISA customers used the full £20,000 allowance last year, rising to 65% among those who save in-branch, underlining just how important this option is to those trying to get ahead financially.'
Some building societies reported seeing a jump in cash ISA applications last week, as speculation intensified over the future of the allowance.
They also warned that mortgages could become more costly and harder to access if the cash ISA limit was cut, with retail deposits being needed to fund mortgage lending.
A Treasury spokesperson said: 'Our ambition is to ensure people's hard-earned savings are delivering the best returns and driving more investment into the UK economy.'
Martin Lewis issues reminder to anyone born between 1984 and 2006 as they can get £1,000 free
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