On Monday, it was widely reported that the Chancellor is expected to announce a reduction in the annual tax-free cash ISA allowance from the current £20,000 ceiling in her Mansion House speech next week.
Cash ISA provider Plum told The i Paper it had seen a 69 per cent increase in deposits in cash ISAs in the first three days of this week compared to the first three days of last week, as savers act to beat any change in terms.
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Leeds Building Society, another provider, said it had seen a 32 per cent increase in account openings on Monday to Wednesday this week compared to the previous week.
Other providers have said that the number of savers pushing to open a cash ISA has increased longer term too.
Mark Hicks, head of active savings at Hargreaves Lansdown, said: “Cash ISA season continues to last even longer with cash ISA rates offering greater returns than regular savings accounts.
There has been continued speculation that the Chancellor will trim back the amount that can be saved in the popular savings accounts, perhaps even as low as £4,000.
Growing the economy is a key plank of the Government’s agenda, and crucial if it is to keep to its spending hopes, as well as its test for the electorate that it will put more money in people’s pockets.
People can usually put £20,000 a year into different types of ISAs, with an alternative being a stocks and shares ISA, where cash is invested and the returns are free of tax.
The Treasury has said that it is looking at options to reform ISAs. Earlier this year, Reeves told the BBC: “I’m not going to reduce the £20,000 ISA limit, but I do want people to get better returns on their savings, whether that’s in a pension or in their day-to-day savings.
Should you put money into a cash ISA now?
It is unclear when any change to the cash ISA allowance would begin, but experts suggest it would likely be the start of the next tax year, in April, rather than immediately.
Tom Selby, director of public policy at AJ Bell, said it likely “wouldn’t be workable” to introduce a new limit partway through a tax year, as many people would already have exceeded the cash ISA limit.
With a usual savings account, basic rate taxpayers pay 20 per cent tax on interest earned over £1,000 per year, while higher rate payers pay 40 per cent on interest earned over £500, and additional rate taxpayers pay 45 per cent on all their interest.
The best cash ISA rate on the market, from Trading 212, pays 4.98 per cent for a year, and there are multiple fixed rate options of over 4 per cent.
An alternative is getting a stocks and shares ISA. This can result in better returns, but there is a chance you could lose money too. It is only recommended that you get one of these if you are prepared to keep your money stashed away over the long term – likely for five years or more.
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