Martin Lewis in cash ISA 'sooner than later' action advice over Rachel Reeves rumours

Money Saving Expert founder Martin Lewis has urged people to take urgent action over cash ISAs amid rumours of potential tax raid by chancellor Rachel Reeves. Writing in the new email alert from the MSE website, Mr Lewis said some are saying that the annual ISA allowance could be cut from £20,000 down to £4,000 'which makes it all the more important to use up new allowances sooner than later'.

The new tax year started on April 6 and . He said: "So you've a brand new £20,000 ISA allowance to shelter savings & investments from tax. I know I talked about this a fortnight ago, but that was so last (tax) year.

"Yet while the tax year is new, 'ISA season' is already getting old - we're close to the end of the usual short period where firms boost ISA deals to win business while demand is high."

He said that if the Chancellor did decide to cut the rate then it would 'probably' happen in the Autumn budget. The documents alongside the Spring Statement said the government wants to get the "balance right" between cash and equities in ISAs as part of efforts to push through a retail investing revolution. It means a change to the status quo is being considered ahead of the Budget later this year, with Labour having already committed to ISA simplification and encouraging greater use of Stocks and shares ISAs during the general election campaign.

Mr Lewis said on the MSE site: "The Chancellor has been evaluating cutting the cash ISA allowance - rumours say to as low as £4,000 - and if that does happen, it's thought it'd likely be announced in the Autumn Budget (though with so much current uncertainty, anything could or couldn't happen, at any time).

"The concept behind it is that it'd encourage people to put the money in shares ISAs instead (personally, I'm sceptical if it'd work - many will just keep saving but pay more tax). Of course, everything is pure supposition - I doubt any firm decision has been made yet.

"But if it happens as rumoured, it WOULDN'T impact money already in cash ISAs, it'd just cut what you can put in, in future. Whether it'd start immediately, or in January or April 2026, no one knows (including at this point, I suspect, Rachel Reeves). Yet if you plan to save in a cash ISA, all of this would suggest getting it in sooner would seem safer."

Mre Lewis explained people should use ISAs because they allow people to make sure savings interest is tax-free. Each tax year, every UK adult currently gets a £20,000 ISA allowance to put money away tax-free in savings via a top cash ISA, or in investments via a shares ISA. He added: "If you don't use this year's ISA allowance, you lose it when the tax year ends (ie, it can't be carried over), which will be 5 April 2026 for this tax year. Yet once it's in an ISA, it stays tax-free year after year, so some who've maxed out every year's allowance have £100,000s protected from tax."

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