Labour could limit how much you can save into ISAs in a bid to clamp down on the amount you can benefit from the tax-free savings scheme.
Under the current rules, you can save up to £20,000 a year in ISAs, with high earners able to build up a large pot of tax-free cash in these accounts.
But a freshly unearthed article written by Chancellor Rachel Reeves suggests she could make the rules less generous, reports The Telegraph.
Now experts are issuing urgent advice about what to do before the Budget.
She said in an article for the Independent in 2016 that the system needs “overhauling”, stating: “Currently 60 percent of the tax-free return on ISAs goes to the highest 15 percent of earners, and the increase in the ISA limit from £7,000 to £15,000 over the past decade has only helped those who can save big sums of money every year.”
She wrote another piece in 2016 for Labour group, Progress, calling for ISAs to change as wealthy savers were taking advantage of the system and it was moving away from the “original purpose of helping a large number of people build a nest egg”.
Conservative MP, Dame Harriett Baldwin, said a cap on ISAs is “highly likely”, suggesting this could be set at £500,000 or even lower.
Iain McLeod, consultant at wealth firm St James’s Place, urged people to make the most of their ISA allowance ahead of any changes in the Budget.
He said: “It’s worth maximising contributions before potential rule changes. ISAs allow you to grow your savings tax-free, shielding them from capital gains tax.
“However, they aren’t exempt from inheritance tax, which should be considered as part of your estate planning strategy. Making contributions now ensures you’re taking advantage of the current tax-efficient environment.”
Wealth firm Vanguard said they have seen a large uptick in clients maxing out their ISA allowances ahead of the Chancellor’s statement on October 30.
James Norton, head of Retirement & Investments at Vanguard Europe, said: “Savers and investors should not let speculation cloud their judgement – maintaining clear goals and a long-term investment perspective will continue to be crucial in setting you up for future success.
“Irrespective of changes announced or not announced on 30th October, now is as good a moment as ever to check how much you’re saving each month, whether you’re investing tax-efficiently and if you’re on track to reach your ambitions.
“Tax-wrapped products will continue to be a critical component of a long-term savings plan. It may be worth considering spreading investments across a of accounts – including ISAs and pensions – to reduce some of the risk that tax laws, as well as personal circumstances, can change.”
Mr Norton cautioned against making snap decisions because of speculation about what policies could change.
He explained: “Maximising the tax-free allowance right now will not necessarily be the right strategy for everyone. Investment timelines must be taken into consideration.
“Remember, savings put into a private pension cannot be accessed until later in life and even then, the tax implications of pension drawdown must be considered.
“Investors should take comfort that using tax wrappers wisely, keeping costs as low as possible, investing in a globally diversified portfolio and tuning out the noise, has proved to be a recipe for success for long-term investors, even when there are shorter-term headwinds.”
