There’s always speculation before a big fiscal event like Reeves’s Spring Statement on March 26. Rumours fly.
So when I heard she was plotting to slash the Cash ISA allowance from £20,000 to just £4,000, I was sceptical. It’s an obviously unpopular move –eight million savers use their allowance every year.
Yet she’s had ample opportunity to shoot down the rumours, and hasn’t. When pressed, she talked about striking the right “balance” between Cash ISAs and Stocks and Shares ISAs. Which sounds ominous.
Maybe she’s just softening us up. Perhaps she’ll cut the allowance to, say, £10,000, so instead of outrage, savers feel relieved. Is she that cunning? I’m not convinced.
Normally, acting on pre-Budget speculation is risky. If the rumour proves false, jumping the gun can backfire.
But this time, it’s different.
Because if you think Reeves really will slash the Cash ISA allowance, there’s only one thing to do: max out the one you’ve got.
This could be your last chance to go big on tax-free cash.
As the tax year-end loom, experts line up to urge savers to use their ISA allowance before it expires at midnight on April 5. Miss the deadline, and your allowance is gone for good.
Today, the urgency is even greater. This could be the last chance to park £20,000 in a Cash ISA in one go. Any cut could take effect as soon as April 6.
Most of us won’t have £20,000 to tuck away. But it’s still worth saving all you can.
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, agrees. “While acting on speculation can be dangerous, using this year’s ISA allowance to the max is a sensible response,” she said.
“Every pound you save stays protected from tax year after year, unlike money in regular savings accounts or taxable investments.”
Every adult gets an ISA allowance, so couples can double up to shield up to £40,000 from tax annually.
The countdown is on, Haine warned. “Ensure your contributions are processed in time and lock in your tax-free savings before it’s too late.”
That’s sensible advice at any time – but especially now.
Those torn between a Cash ISA and a Stocks and Shares ISA may lean towards cash this year.
Reeves hasn’t suggested cutting the £20,000 Stocks and Shares ISA limit. That would be a surprise.
What she might do is to restrict some or all of it to UK shares only, reviving the so-called British ISA.
Her excuse for cutting the Cash ISA is to pump more money into British businesses. There’s no point if Brits invest in US shares instead.
That’s something to bear in mind when deciding where to invest your Stocks and Shares ISA this financial year.
Whatever your decision way, act before midnight on April 5. After that it’s too late.
