Cash ISA cut: Yorkshire Building Society tells Rachel Reeves cutting limit will hit housing market
Yorkshire Building Society has urged Rachel Reeves not to reduce the current cash ISA limit in the Budget, saying this would hit first-time buyers.
The Chancellor is under huge pressure to find billions of pounds for the Exchequer in her November 26 statement, and earlier in the week gave a speech which appeared to indicate that manifesto-busting tax rises are on the way.
Rumours that the current £20,000 tax-free deposit allowance for cash ISAs could be reduced have been circulating for months, with recent speculation suggesting a £10,000 annual limit was under consideration.
The move is said to be aimed at persuading more people to invest in stocks and shares, which can have a higher return while also raising more money in tax.
Ms Reeves recently told The Yorkshire Post that she wants “people to get better returns on the money they are investing”.
But in its formal submission to the Treasury ahead of the Budget, YBS said that any changes could hit first-time buyers.
This said: “Cash ISAs have long been a cornerstone of personal savings in the UK, providing a tax-efficient encouragement for individuals to save.
“Simply changing the cash ISA limit is unlikely to result in more people investing, but it will hurt people who are responsibly saving for short-term goals, when investing is not appropriate.
“Cash ISA deposits underpin the UK mortgage market and represent a direct investment in the UK economy.”
Susan Allen, YBS chief executive, explained: “We want the government to keep the £20,000 Cash ISA allowance, because it offers our members a fair, tax-free return on shorter-term savings.
“It gives them a safe and stable way to grow savings while supporting mortgage lending and strengthening the UK economy.
“We also want the government to step up support for aspiring homeowners, especially first-time buyers, and do more to make the housing market work better for buyers, renters and landlords.”
This comes as the pressure is growing on the Chancellor from all angles ahead of the Budget later this month.
The National Institute of Economic and Social Research (Niesr) has further raised the spectre of tax increases, as it said it believes Ms Reeves is on track to miss one of her fiscal rules by £38.2bn in 2029-30.
It said the Chancellor will likely need to break her manifesto pledge and increase income tax, rather than “messing around” with changes to marginal taxes, which it argues would be more damaging to the economy in the long run.
Niesr said a 2p rise on the 20 per cent basic rate of income tax was expected to be the minimum needed to repair Britain’s battered public finances, raising around an extra £20bn.
However, surveys indicate that any tax rises are likely to dent business confidence across the region.
The Business Owners Sentiment Survey, which takes the views of 500 firms, found that in Yorkshire and the Humber two-thirds of respondents said they would consider moving their company abroad if taxes are hiked.
Some 66 per cent would consider leaving the UK if a wealth tax was introduced, while even more said they would relocate if capital gains tax rates rise.
More than half of business from Yorkshire and the Humber that responded said they either anticipated a hiring freeze or expected to make redundancies.