Copyright dailystar
Labour has been called on to double the ISA allowance amid reports Chancellor Rachel Reeves slash it in the Autumn Budget. However, a banking chief has urged her to reverse course entirely. Currently, savers can deposit up to £20,000 annually into ISAs whilst maintaining their tax-free status. With ISAs, you're exempt from paying any tax on interest earnings or investment growth within the account. Danny Haynes, chief product officer at Kroo Bank , said: "We would suggest that, as soon as public finances allow, the tax-free ISA limit should be doubled to encourage saving and investments." The bank called for the Government to introduce policies to help savers "put their money to work" through savings accounts, ISAs and investments. Mr Haynes said: "The Bank of England found that over £1trillion of the public's money is earning less than 2 percent interest – making wealth growth difficult, and harming business success as a result. This is the primary issue that must be addressed, especially in times of economic uncertainty." With £10,000 in savings earning 2 percent, you would generate £200 in interest annually. However, several easy access ISAs are currently offering rates exceeding 4.4 percent. By transferring your funds to an account paying 4.4 percent instead, you would earn £440, boosting your savings by an additional £240. Mr Haynes said that policies the Chancellor might be considering include slashing the £20,000 ISA allowance for cash holdings by half, or implementing a minimum requirement to invest in UK companies for those holding stocks and shares ISAs. He explained why such measures could be counterproductive: "The UK's economy is in a complex situation, and measures to increase revenue into public finances and boost investment levels in the UK stock market are understandably attractive. However such significant reforms to two of the public's most reliable and successful methods of saving risks damaging the very economy that the measures are designed to bolster. "Encouraging investment in UK markets is a vital and commendable aim – but this must be achieved by making such investments as attractive as possible, not by potentially disruptive, enforcing measures. Savers faced with a reduced Cash ISA tax-free allowance, and a Stocks and Shares ISA that has been stripped of its current freedom from geographical limitations, will simply be discouraged from these tried methods of saving and investing – and will potentially look into riskier, often overseas-based assets as alternatives." At present, you can split your £20,000 ISA allowance between cash ISAs and stocks and shares ISAs. Asked previously about plans for policy changes in the Budget, a spokesperson said: "We do not comment on speculation around future changes to tax policy." Chancellor Rachel Reeves will present her Autumn Budget before Parliament on Wednesday, November 26.
