Chancellor John Healey has abandoned 'car crash' plans to cut the cash Isa allowance for under-65s in a major victory for the Daily Mail and This is Money.
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This → abandon → Mail
The amount that can be funnelled into a tax-free cash Isa every year will now stay at £20,000 instead of being slashed to £12,000 from April for savers under the age of 65.
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that → funnel → 65
Savers who do not want to risk their cash on the stock market could breathe a sigh of relief as Rachel Reeves' ill-thought-out plans were scrapped.
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plans → want → relief
We had campaigned for a reversal to the planned cut since it was announced last autumn after unhappy readers wrote to us in droves.
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readers → campaign → droves
Just two weeks ago, we issued a final plea as part of our Hands Off Our Cash Isas campaign for the Chancellor to reverse the punitive savings raid.
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Chancellor → issue → raid
And Mr Healey on Wednesday announced he will not go ahead with the changes in an embarrassing moment for Ms Reeves.
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he → announce → Reeves
He said the limit 'will stay at £20,000 tax-free for people of all ages'.
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limit → say → ages
That means all taxpayers will still have a £20,000 allowance which they can save into tax-free Isas every year and can split however they choose.
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they → mean → Isas
However, there was a sting in the tail as the Chancellor upped savings interest tax rates by a further two percentage points, to 24 per cent, 44 per cent and 40 per cent from April
The Government has scrapped plans to cut the annual Cash ISA allowance for savers under 65 from £20,000 to £12,000, keeping the £20,000 tax-free limit for all ages
Interest earned on savings in cash Isas is tax-free, and stocks and shares Isa investments face no capital gains or dividend taxes.
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Interest → be → gains
But Ms Reeves' plans would have piled on costs and red tape, adding complexity for no real gain.
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plans → pile → gain
The changes would have prevented under-65s from moving their savings between cash Isas and stocks and shares Isas, alongside breaking the long-term pledge that Isas are tax-free.
And those who held cash for legitimate reasons in investment Isas would be hit with a 22 per cent charge on interest.
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who → prevent → interest
Experts warned that adding complexity to Isas could even discourage savers from switching to investments.
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adding → warn → investments
Dame Meg Hillier, the MP serving as chairman of the Treasury committee, said it was a 'victory for common sense and a well-earned victory of the Mail's Hands Off Our Cash Isas campaign'.
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it → serve → campaign
She added: 'These over-complicated changes would have caused confusion for customers and led to problems for building societies who rely upon the money held in cash Isas.'
Rachel Reeves had planned to reduce the annual Cash ISA allowance for under-65s from £20,000 to £12,000, but the Government has now dropped the proposal
Tom Selby, director of public policy at AJ Bell, said: 'Rachel Reeves' Isa reforms were a car crash, lamented by most of the retail investment industry.
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reforms → add → industry
It makes sense the cash ISA cut has been unceremoniously ditched.'
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cut → make → sense
Rachel Springall, of rate scrutineer MoneyfactsCompare, said the decision brings 'relief' but added that the time and cost spent by providers preparing for the change 'is such a waste'.
Lawrence Chan, head of Nottingham Building Society, called the reversal 'great news for savers who value certainty and flexibility'.
Eric Leenders, of UK Finance, said the group was 'pleased' as cash Isas 'play an important role' helping people save for the future.
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people → say → future
But city firms were disappointed after lobbying Ms Reeves to scale back tax breaks on cash to boost investment in the stock market.
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firms → disappoint → market
Michael Healy, chief executive of IG Consumer, said: 'The Chancellor has squandered a golden opportunity to help British households build long-term wealth.'
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households → say → wealth
However, many said restricting savings is not the right way to push a thriving investment culture.
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restricting → say → culture
Claire Exley, of JP Morgan's investment arm, said the move would have risked making the Isa system 'too hard to understand for the average consumer'.
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system → say → consumer
Mr Healey has said he will instead work with the sector to create a new 'starter Isa' to reward first-time investors.
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he → say → investors
READ MORE: Worse off under Burnham: The middle-earners and families struggling with bills who face a fall in living standards under Labour's 'is that it?'
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that → read → Labour
Budget
- Healey has launched yet another spiteful attack on the prudent – why I fear this is just the calm before the storm, says JEFF PRESTRIDGE
- ANDREW NEIL:
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PRESTRIDGE → launch → storm
Labour believes in deficit reduction on the never-never.
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Labour → believe → never
The more Healey talked of prudence, the more we noticed his profligacy...
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we → talk → profligacy
The bill's UP by £5bn a year: As Tories say UK 'addiction to welfare spending is alive and kicking', Healey vows he'll cut cost 'in a Labour way'
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he → say → way
This wasn't going to be pretty
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This → go → ?
Healey hammers struggling workers, savers and landlords to fund energy bailouts as tax burden heads to new record high - but benefits escape cuts
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burden → hammer → cuts
Healey has shrunk in cowardice from the hard but necessary choices.
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Healey → shrink → choices
We will all pay a price for his warped priorities
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We → pay → priorities
Hospitality industry hails 'first positive Budget in years' - but warned other costs are still harming the high street
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costs → hail → street
This Budget had the cha-cha-cha of siesta hour in a Mexican town.
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Budget → have → town
Lower your sombreros - Hombre Healey's a snoozer: QUENTIN LETTS
- READ MORE: Struggling workers will pay an extra £17billion of income tax by the end of the decade through 'stealth raids'
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workers → lower → raids
The Aporia
