Will Cash ISAs Get Hit in the Spring Budget 2025?

Given the Bank of England downgrading growth forecasts in the UK by 50% to just 0.75% for 2025 and the Labour Government’s fiscal rule to not borrow more to fund increased public spending, it is inevitable that speculation mounts for further tax hits.

The Chancellor has already attacked employers with national insurance contributions increased to 15% and the point at which empoloyers start paying NIC by nearly 50% to just £5,000 pa gross employee income.  Pension funds were also attacked by inlcuding unused pension funds in your estate for inheritance tax as well as farmers and business owners getting hit with a reduction in Agricultural and Business Property Relief on death meaning even more farms and businesses will get hit for inheritance tax on death.

Landlords have been continually hit over the last few years with capital gains tax increases, stamp duty increases, fire regulations and energy performance certificate ratings (now postponed until 2030).

Chancellor Rachel Reeves is running out of options to raise more revenue.  This week many have been speculating that Cash ISAs could be under attack.

Why Attack Cash ISAs?

• 1 January 1987 - Nigel Lawson introduced the tax free Stock and Shares Personal Equity Plan (PEP) to encoiurage investors to save in stock markets thereby investing in businesses.
• 1 January 1981 – The Tax Exempt Special Savings Account (TESSA) was introduced for tax free saving in banks and building socities.  This was restricted to 5 years of saving and invest up to £9,000, with a maximum investment of £3,000 in the first year and £1,800 in each of the second to fifth years.  TESSAs offered no stimulation to stock markets or businesses as it was simply a tax break for cash savers.
• Over the years, these morphed into Stocks and Shares and Cash ISAs.  With Cash ISAs still offering no benefit to the UK economy, they are deemed simply a drain on the tax system given we also have tax free Personal Savings Allowances too.
• In addition, Stocks and Shares ISAs have no requirement to invest in UK stocks and shares i.e., the UK economy, so again there is only some stimulus for the UK economy as well as stimulating other countries’ economies.

Comment

• Mrs Reeves has already given us a signal in soon requiring company pension schemes with a surplus to invest in UK companies only.
• It is not massive leap to require UK Stock ISAs to invest a minimum in UK stocks as well as limiting the amount we can invest yearly or perhaps a lifetime ISA allowance, to restrict the amounts invested in Cash ISAs and invest more in UK business to boost the UK economy.