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The Guardian
11-07-2025
- Business
- The Guardian
Cash Isas: Rachel Reeves pauses plans to reduce amount savers can put in
Rachel Reeves has put plans to reduce the amount savers can put into tax-efficient cash Isas on hold, after lobbying from banks, building societies and consumer groups. The chancellor had been expected to announce changes to the accounts in her Mansion House speech next Tuesday, with cuts to the £20,000 savings limit thought to be at the heart of the plans. Reeves is keen to encourage UK savers to consider stock market investments, where bigger returns are possible but there is also more risk. It had been suggested that the limit on cash Isas could be cut to as little as £5,000. However, building societies had argued that the money deposited by savers was vital to fund mortgages, and that slashing the limit would reduce the number of homebuyers they could help. Reeves has not dropped plans over cash Isas entirely, but ministers want more time to consult the industry, said the Financial Times , which first reported the news. UK savers can invest up to £20,000 each tax year in Isas, and can spread the money across cash versions, which are savings accounts that offer interest, or stocks and shares versions, which offer growth and income. Returns on them are tax-free. Tax-free Isas were introduced in 1999. More than 18 million people have a cash Isa, and an estimated £300bn sits in their accounts. Matthew Carter, the head of savings and mortgages at Coventry building society, said: 'Millions of savers will be able to breathe a sigh of relief if the chancellor has decided to change course on cash Isas.' Carter said cutting the limit would be 'all stick and no carrot'. He added: 'The ambition to encourage more investment in UK equities is a good one. But taking extra risk with the hope of greater longer-term reward isn't always the appropriate choice. Many people, especially those already in retirement or saving for a house deposit, don't need or want the uncertainty of the stock market.' The chancellor is expected to use Tuesday's speech to promise more advice and support for consumers to encourage them to invest in stocks and shares. Sign up to Business Today Get set for the working day – we'll point you to all the business news and analysis you need every morning after newsletter promotion In the UK many consumers choose cash over more risky investments – figures from the investment firm Aberdeen show they typically hold an average of 15% of their assets in cash and 8% in stocks. That compares with 13% for each among French consumers, and with 10% and 33% respectively in the US. The chancellor's speech will come at a time when the Treasury faces difficult decisions about how to balance the public finances. On Friday the latest monthly GDP figures showed that the UK economy contracted in May, falling by 0.1%. The Treasury has been approached for comment.
Yahoo
03-07-2025
- Business
- Yahoo
Cash Isa raid ‘will drive up mortgage costs'
Mortgage costs will surge under Rachel Reeves's plan to cut the tax-free cash Isa allowance, Britain's largest lenders have warned. The Chancellor is considering lowering the amount of money that savers can put into a cash Isa without paying tax from the current rate of £20,000 to as low as £5,000. Yorkshire, Coventry and Skipton building societies say the move could hinder their ability to raise the funds used to provide loans to homeowners. Nearly one in three people in Britain have a cash Isa and some of £300bn savings is tapped by building societies to lend out to homeowners. Chris Irwin, Yorkshire Building Society's head of savings, said: 'Reducing Isa deposits could make mortgages more expensive and less available. 'Cash Isas make up 39pc of all building societies' retail savings balances. This provides a vital source of funding to allow us to offer more mortgages to those that need them.' Yorkshire Building Society is the third largest building society in Britain, with almost £50bn worth of mortgages on its books and more than 3m customers. The mutually owned lender was formed in Huddersfield, West Yorkshire, in 1864. Jeremy Cox, head of strategy at Coventry Building Society, said that Ms Reeves's plans could also have a wider impact on the UK's housing market. He warned that Ms Reeves's plans will 'have consequences for the broader economy, affecting building societies' ability to support mortgage lending and potentially leading to higher cost of mortgages and a fall in housing market activity'. Mr Irwin said the Isa cuts could also hinder Labour's housebuilding push, through which it aims to build 1.5m new homes by the end of its first five-year term. He said: 'We want to support the Government's ambition to build 1.5m new homes. Cutting Isa limits could make that more difficult and have a significant impact on economic activity.' Skipton Building Society, the UK's fourth-biggest mutual lender, said it had warned Ms Reeves that her plans risk 'directly undermining the Government's own target of building 1.5m new homes'. Charlotte Harrison, chief executive of Skipton's mortgage division, said: 'If Isa inflows fall, the cost of funding is likely to rise, and that means mortgages could become both more expensive and harder to access.' The comments come as Ms Reeves is preparing to reveal plans for a major cut to the cash Isa limit at her upcoming Mansion House speech on July 15. The shake-up would come as a major hit to building societies, due to current rules which mean that half of all funding for their mortgages must come from customer deposits. The same rules also restrict building societies from offering stocks and shares Isas of their own, meaning cuts to the cash Isa limit could lead to sharp drops in their deposits. Building societies have spoken out against Ms Reeves's plans, even as stockbrokers have supported them. The stockbrokers and investment platforms could benefit from changes that would allow more money to be invested in stocks-and-shares Isas they offer. The UK has 42 building societies, which serve 26m British customers. Last night, a Treasury spokesman said: 'We do not comment on speculation.' Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
The Sun
03-07-2025
- Business
- The Sun
Mortgage bills could jump for millions of households due to Rachel Reeves cash ISA changes, UK's biggest lenders warn
MORTGAGE bills could jump for millions of households if plans to shake up cash ISAs go ahead, UK's biggest lenders have warned. Yorkshire, Coventry and Skipton Building Society have all said costs could rise if the cash ISA tax-free allowance is slashed. 1 Rachel Reeves is reportedly eyeing cutting the maximum amount savers can add into a cash ISA without being taxed from £20,000 to £5,000. At the moment, you can stash away £20,000 a year in ISA savings accounts without paying any tax on interest or earnings. But all three major lenders have cautioned this could have a knock-on effect on what they earn from customers and lead to mortgage bills rising for households, The Telegraph reports. Chris Irwin, Yorkshire Building Society's head of savings, said: "Reducing Isa deposits could make mortgages more expensive and less available. "Cash Isas make up 39% of all building societies' retail savings balances." Mr Irwin also said ISA cuts could hamper Labour's push to build 1.5million homes by the end of its five-year term. Skipton Building Society, the UK's fourth largest building society, said it had warned Ms Reeves that her plans risk 'directly undermining the Government's own target of building 1.5m new homes '. Its chief executive, Charlotte Harrison, added: "If ISA inflows fall, the cost of funding is likely to rise, and that means mortgages could become both more expensive and harder to access." Meanwhile, Jeremy Cox, head of strategy at Coventry Building Society, said plans to shake up the cash ISA market could affect building societies' "ability to support mortgage lending and potentially leading to higher cost of mortgages and a fall in housing market activity". Chancellor plans to cut cash ISA allowances The warning from the lenders comes as the Chancellor reportedly prepares to reveal plans to cut the cash ISA limit at her Mansion House speech on July 15, as first reported by The Financial Times. Ms Reeves said last month she had no plans to reduce the total amount that can be saved into ISAs each year. But City bosses have been urging her to reduce the cash ISA allowance to encourage savers to invest their money in stocks instead. It comes as the government tackles a giant budget deficit - in the 2023/24 financial year it was £131billion - equivalent to 4.8% of GDP. A government deficit is when a government's total spending exceeds the revenue it brings in. The annual cash ISA tax-free allowance was set at £20,000 in the 2017/18 tax year and has not changed since. A Whitehall source familiar with discussions told The FT that negotiations about what level the Cash ISA limit could be set at are st ill ongoing. Cash ISAs the most popular of the four different ISA accounts, with roughly 12.4million holding one. A record £49.8billion was saved into them last year. How much any changes to the cash ISA allowance will affect you depends on how much you usually add into yours. For example, if you only add £4,000 into yours every year, the planned changes won't make a difference to you. Analysis by The Sun's Consumer Editor ALICE Grahns, Consumer Editor, shares her views. The expected change to ISA allowances is a contentious one, potentially cutting the amount Brits can save tax-free each year. While details are yet to be confirmed, there has been speculation for months that Chancellor Rachel Reeves will shake up the rules. The hope is that limiting cash ISAs will nudge people into investing instead, giving the London stock market a much-needed boost. However, some experts say it will do little to encourage households to invest because it will not change their appetite for risk. Cutting the allowance means millions would face a choice between putting money into taxable savings accounts or investing in riskier stocks. As noted, a recent survey by stockbroker AJ Bell found that only one in five savers would switch to the stock market if their limits were cut. Over half would simply put their money into a taxable savings account instead. Newcastle Building Society has also warned that there is a "misguided" assumption that Cash ISA savers could just as easily and comfortably invest in the stock market. The Treasury has to get the balance right. TOP ISA TIPS Cash ISAs are so popular because they offer savers a guarantee of not losing any money. This is in comparison to Stocks and Shares ISAs which can fluctuate in value based on your investments. Sarah Coles, personal finance analyst at Hargreaves Lansdown, said a mixed portfolio of ISAs will see you get the best bang for your buck though. You can add money into multiple ISAs at one time, so long as you don't breach the current £20,000 annual allowance. It's also worth shopping around for the best deals too, Sarah said. She said: "How you divide your annual allowance between cash and stocks and shares will depend on your time horizon, risk profile and objectives, but most people should consider a mix of both. "If you're planning a cash ISA, don't just go with your usual bank, because online banks and savings platforms are competing hard for your money at the moment, so it really pays to shop around and consider all the alternatives." If you are worried about opening a Stocks and Shares ISA, research is key as you don't want to invest badly. Websites like AJ Bell or offer top tips on how best to go about opening one. In any case, the returns you get on Stocks and Shares ISAs over the longer term compared to Cash ISAs are usually much bigger. Just bear in mind with investing there is always a risk attached. Myron Jobson, from interactive investor, said: "Those willing to take on some investment risk could see better long-term returns through a stocks and shares ISA. "While the value of investments can go up and down, history shows that stock markets tend to outperform cash over extended periods." .
Telegraph
03-07-2025
- Business
- Telegraph
Cash Isa raid ‘will drive up mortgage costs'
Mortgage costs will surge under Rachel Reeves's plan to cut the tax-free cash Isa allowance, Britain's largest lenders have warned. The Chancellor is considering lowering the amount of money that savers can put into a cash Isa without paying tax from the current rate of £20,000 to as low as £5,000. Yorkshire, Coventry and Skipton building societies say the move could hinder their ability to raise the funds used to provide loans to homeowners. Nearly one in three people in Britain have a cash Isa and some of £300bn savings is tapped by building societies to lend out to homeowners. Chris Irwin, Yorkshire Building Society's head of savings, said: 'Reducing Isa deposits could make mortgages more expensive and less available. 'Cash Isas make up 39pc of all building societies' retail savings balances. This provides a vital source of funding to allow us to offer more mortgages to those that need them.' Yorkshire Building Society is the third largest building society in Britain, with almost £50bn worth of mortgages on its books and more than 3m customers. The mutually owned lender was formed in Huddersfield, West Yorkshire, in 1864. Jeremy Cox, head of strategy at Coventry Building Society, said that Ms Reeves's plans could also have a wider impact on the UK's housing market. He warned that Ms Reeves's plans will 'have consequences for the broader economy, affecting building societies' ability to support mortgage lending and potentially leading to higher cost of mortgages and a fall in housing market activity'. Mr Irwin said the Isa cuts could also hinder Labour's housebuilding push, through which it aims to build 1.5m new homes by the end of its first five-year term. He said: 'We want to support the Government's ambition to build 1.5m new homes. Cutting Isa limits could make that more difficult and have a significant impact on economic activity.' Skipton Building Society, the UK's fourth-biggest mutual lender, said it had warned Ms Reeves that her plans risk 'directly undermining the Government's own target of building 1.5m new homes'. Charlotte Harrison, chief executive of Skipton's mortgage division, said: 'If Isa inflows fall, the cost of funding is likely to rise, and that means mortgages could become both more expensive and harder to access.' Isa shake-up The comments come as Ms Reeves is preparing to reveal plans for a major cut to the cash Isa limit at her upcoming Mansion House speech on July 15. The shake-up would come as a major hit to building societies, due to current rules which mean that half of all funding for their mortgages must come from customer deposits. The same rules also restrict building societies from offering stocks and shares Isas of their own, meaning cuts to the cash Isa limit could lead to sharp drops in their deposits. Building societies have spoken out against Ms Reeves's plans, even as stockbrokers have supported them. The stockbrokers and investment platforms could benefit from changes that would allow more money to be invested in stocks-and-shares Isas they offer. The UK has 42 building societies, which serve 26m British customers.
Daily Mail
21-06-2025
- Business
- Daily Mail
EXCLUSIVE How 5,600 high rollers switched current accounts with £100,000 in the bank
Thousands of current account switchers have transferred with more than £100,000 in the bank, exclusive data shows. Since the start of 2024, 5,600 people have used the official Current Account Switching Service (Cass) to swap bank with six-figure sums. Many banks offer cash incentives of up to £200 to entice new customers to switch primary bank account. The process of switching accounts became smoother with the arrival of Cass in 2013 which is operated by Pay UK. It has facilitated more than 11m bank switches. In the first three months of 2025, 228,805 bank switches took place, according to bank-specific data from Cass. Of these, 995 switched their current account with balances of more than £100,000, the data reveals, representing 0.4 per cent of bank switchers. In the same period, 13,259 people moved balances between £10,000 and £99,999.99. There are some 8.3m current accounts in Britain with balances of £10,000 or more and 80pc of these accounts pay no interest, according to savings app Spring. The average current account balance is around £2,000. For those earning 0pc on £100,000, they would get £4,500 annual interest with the top paying easy-access rate from Coventry Building Society. Individuals who transfer six figure sums will also breach Financial Services Compensation Scheme (FSCS) protection. This guarantees sums of up to £85,000 per individual if a bank goes bust. John Dentry, of Pay UK, said the fact people feel safe enough to move across large sums is because it provides a secure service, guarantees completion within seven days and carries all direct debits across. If something goes wrong, Cass promises to refund interest lost and any charges. It says 99.8pc of switches complete without a problem. The Cass data also shows 50,000 people switched between £1,000 and £9,999.99 to a new bank account in the first three months of the year. But most switchers transferred between 1p and £999, with 130,824 switching this amount. Birmingham was the hotspot for switching, with just shy of 6,000 customers taking the leap. This was followed by Sheffield, Manchester and Nottingham.
