Labour could bring in some key changes to ISA allowances in the Autumn Budget including a lifetime cap on how much you can save into the tax-free savings vehicle.
Experts at accountancy firm BDO have warned there could be a ‘sting in the tail’ as the Government looks to shelve plans set out by the previous Conservative administration for a British ISA allowance.
Private wealth tax partner, Elsa Littlewood, said: “Recent reports – although not yet officially confirmed by the Government – suggest the previous Government’s plans for a UK ISA have been shelved.
“This could feasibly be presented under the guise of ‘simplification’, or as part of a wider ranging reform to the ISA regime.
“While savers may be hoping that the originally proposed additional £5,000 per year allowance for the UK ISA would be added to the current £20,000 annual ISA limit, there could be a sting in the tail.
“It’s not impossible that the Chancellor could seek to impose a lifetime cap on ISA saving – perhaps set at around £500,000.
“If this were to happen, we would hope that the limit would be indexed to rise in line with inflation.”
Ms Littlewood also warned that other ISA allowances could be made less generous after the Autumn Statement.
She explained: “We could also see a reduction in the annual allowance available for cash ISAs, but an increase in the annual allowance for stocks and shares ISAs in an effort to support economic growth.
“We may also see changes to the rules on the usage of Lifetime ISA funds. Currently, these funds can be used by first time buyers for properties worth £450,000 or less.
“With rising property prices, this can limit options for first-time buyers, particularly in London and the South East, and the penalties can be quite punitive for those who find themselves in this position.”
Lifetime ISAs are a Government-backed scheme where any deposits are matched with a 25 percent bonus, with savers allowed to put in up to £4,000 a year, with a potential £1,000 bonus.
But the account has several important restrictions, such as that you have to be aged 18 to 39 to open an account and you can only make deposits until the age of 50.
The funds can only go towards your first property or can be accessed once you turn 60. If you withdraw funds for other purposes, there is a 25 percent penalty charge.
