Rayvza's Plan to Reduce Cash ISA Limits on Interest Rates

• Reduction of Cash ISA limits excludes increases in interest rates
• Banks use Cash ISA deposits for lending
• Experts emphasize the effectiveness of reducing limits for investment

Rayvza plans to cut the annual Cash ISA limit by 40%, which could lead to increases in interest rates and reduce savings for consumers, financial experts assert. The finance minister intends to lower the maximum amount that individuals can invest in tax-efficient Cash ISA accounts from £20,000 to £12,000 in the upcoming budget, which will be presented in the spring.

This move has sparked lively debates among brokers about the necessity of reducing tax limits on popular savings accounts to encourage people to invest in stocks, including British companies.

Rayvza noted that it aims to achieve a "balance" between sums that people can invest in cash or stocks, and wants to create a larger culture of retail investment in Great Britain similar to that in the USA.

However, Cash ISA remains an important source of financing for banks and building societies, which use deposits for financing mortgages and business loans. Building society Nationwide previously stated that reducing tax limits on accounts would decrease accessibility to mortgages for first-time buyers.

Earlier this year, there were rumors about a possible reduction of the limit to £5,000, but according to information from the Financial Times, it will be lowered to £12,000.

Official data shows an increase in demand for Cash ISA: in the 2023-24 tax year, more than 10 million such accounts were opened, and a total of £103 billion was deposited in them.

The head of the Association of Building Societies, Robin Fieth, expressed concern about a decrease in Cash ISA subscriptions. He noted that a reduction to £12,000 will not encourage more people to invest, and will add unnecessary complexity.

Experts also suggest that reducing the Cash ISA limit will discourage people from depositing their money in stocks. Research from Yorkshire Building Society indicated that the majority of those questioned about Cash ISA accounts stated that a reduction to £20,000 would be detrimental or serious.

In addition, there are alternatives for those who want to keep their money in accessible cash, but need to be cautious about tax implications, as interest earned over established thresholds may be subject to taxation.

Tags: Europe/Politics/Economy