Cash ISA £2.1bn replace as £20k tax-free cap hangs in steadiness | UK | News | EUROtoday

Savers with a money ISA paid £2.1 billion much less tax in 2023 whereas savers with a shares and shares ISA traders paid £5.6 billion much less tax, in response to AJ Bell.

It mentioned a freedom of data request it made to HMRC discovered that the typical money ISA saved £114 tax a yr, whereas the typical tocks and shares ISA holder saved £721 a yr.

Laith Khalaf, head of funding evaluation at AJ Bell, mentioned rising rates of interest, frozen tax thresholds, and cuts to the dividend and capital good points tax allowances, have made these tax shelters far more beneficial.

Chancellor Rachel Reeves had been underneath fireplace for reportedly planning to both scrap the money ISA or cut back the £20,000 annual tax-free allowance, with a brand new cap of £4,000 being thought-about. However, the proposals, which had been touted as a technique to increase the UK’s economic system by encouraging extra savers to take out shares and shares, is not going to be introduced within the upcoming Spring Statement.

Treasury officers mentioned the Chancellor was nonetheless contemplating adjustments, however these could be introduced at a later date. These may nonetheless embrace a proposal to restrict the quantity savers can put right into a money ISA.

Khalaf mentioned: “ISAs have never been more valuable to savers and investors as these figures clearly demonstrate.

“Rising rates of interest have left many individuals on the hook for tax on their financial savings curiosity, however those that have sheltered their cash in a money ISA collectively saved themselves over £2 billion in tax within the final tax yr (see desk beneath).

“A typical cash ISA saver therefore saved £114 in tax thanks to wrapping their cash in a tax shelter, based on the latest cash ISA holder numbers published by HMRC.

“The worth of the tax safety offered to money ISA savers has ballooned in recent times.

“This is primarily a operate of rising rates of interest bringing extra financial savings curiosity into the tax web. Frozen tax thresholds additionally imply extra individuals at the moment are responsible for earnings tax on their financial savings curiosity at greater and extra charges too.”