Budget warning as Brits should ‘protect wealth’ from Rachel Reeves

Savers have been told to protect their wealth by an expert as Rachel Reeves is set to only make the tax environment tougher. Jason Hollands, managing director of finance firm Bestinvest, highlighted new figures which suggested that this year saw 15million people subscribe £103billion to adult ISAs, the highest level recorded, and up from 12.4million subscribers in the prior year. While the number of stocks and shares and lifetime ISAs subscribed to both increased, the overall 21% increase in adult ISAs was driven primarily by a surge in people opening Cash ISAs, Mr Hollands specified.

The huge adult ISA subscription for 2023/24 was driven by the rise in cash ISA subscriptions, which grew by 67% (£27.9billion). Stocks and shares ISA subscriptions followed with a 10.9% increase (£3.1billion). The direction of travel is "unsurprising", given UK interest rates climbed to 5.25% during that year, their highest level since 2008.

The Bank of England chose to freeze them at 4% earlier this week. The UK's tax burden is also set to get worse, as Ms Reeves scrambles to fill a black hole in the public finances.

She is said to be considering changes to property taxes, adding VAT to rental income and altering inheritance tax.

Mr Hollands said: "For now, it seems, the Chancellor’s plans to cut the Cash ISA allowance have been put on 'pause', but that does not mean reform of ISAs is off the table completely for the remainder of this parliament.

"It should be noted that several alumni of the Resolution Foundation, a think tank which has previously advocated capping ISAs to £100k per person, are now in influential positions in the Government.

“ISAs should not be taken for granted, given the increasingly painful tax burden in the UK, with much diminished annual exemptions for capital gains and dividends, and higher rates of CGT introduced at last year’s Budget.

"As the tax environment is only likely to toughen in the near term given the hole in the public finances, those able to make use of ISAs to protect wealth from taxation should do so as fully as possible.”

Given that there is such a vast pool of assets held out of the reach of the taxman, some City firms have been urging the Chancellor to take steps that would drive more savers into the UK stock market, both through limiting the amount that can be held in cash ISA, and narrowing the remit of stocks and shares ISAs to have a domestic bias.

But Ms Reeves has paused reported plans to cut the annual cash ISA allowance, in an effort to get more Brits to invest their savings.