Anger at Labour’s £600m stealth raid on savers as tax-free ISA restrict is frozen for 13 YEARS
Labour is facing anger over a stealth raid on savers today after Rachel Reeves extended a freeze on ISA limits.
A £20,000 ceiling on how much adults can put into the tax-free vehicle each year has been in place since April 2017.
But the Chancellor decided in the Budget yesterday that cash ISAs and stocks and shares ISAs will be subject to the same cap for at least another six years.
The annual level for Lifetime ISAs will be held at £4,000 and Junior ISAs £9,000.
The policy is expected to raise more than £600million a year for the Treasury by 2030.
If the £20,000 tax-free allowance had risen each year in line with the consumer prices index measure of inflation since 2017, the annual allowance would now be roughly £26,000.
Savers and investors had been clinging to hope that the Chancellor would finally raise the £20,000 ISA allowance.
However, there was also a sigh of relief that the allowance has not been cut in a bid to raise money to fill a £22billion black hole in the country’s finances.
A rumoured lifetime cap of £500,000 also did not materialise in the Budget.
There will remain no limit on how much money savers can amass in an ISA in total, as long as they stick to their annual limit of £20,000 a year.
Lifetime ISAs were launched in April 2017 with an annual limit of £4,000, which is included in the overall £20,000 ISA limit.
These deals allow under-40s to save for a home and retirement at the same time , with the Government offering a 25 per cent top-up on contributions, worth up to £32,000 if you max out your fund.
Savings and bonuses can be used towards a deposit on a first home worth up to £450,000.
The Chancellor decided in the Budget yesterday that cash ISAs and stocks and shares ISAs will be subject to the same cap for at least another six years
Withdraw money from a Lifetime ISA for any reason other than buying a first home or retirement incurs a 25 per cent penalty.
Anna Bowes, co-founder of the comparison site Savings Champion, told the Times: ‘It’s disappointing that the allowance has been frozen again, especially given that so many savers are paying more income tax on their savings.’
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: ‘This is a missed opportunity to make tweaks to the Lifetime ISA, including using the Lifetime framework to support self-employed people with their pension planning, cutting the Lifetime Isa penalty from 25 per cent to 20 per cent and raising the maximum age to pay into a Lifetime ISA to 55.’
