People with an ISA are 'at risk' from Labour tax raid which could be 'backdated'

Savers who have an ISA open have been warned over changes coming from the Labour Party government and Chancellor Rachel Reeves next month. Ms Reeves could introduce changes to the UK tax system during her Autumn Statement on October 30.

All gains and interest earned in individual savings accounts (Isas) are tax-free for life — but this relief cost the government £4.9 billion in 2022–23 and is expected to cost about £6.7 billion in 2023–24, according to Dan Neidle, who wrote in the Times newspaper.

You can save up to £20,000 into Isas each year and there is no limit to the amount you can hold over a lifetime. Mr Neidle, who was speaking out five weeks out from the Budget being delivered, said that capping tax relief at £100,000 on money held in these accounts could raise about £5 billion this tax year.

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“People have saved for years into their Isa on the promise of this particular tax treatment and many would see it as hugely unfair to change this. I don’t think the government would do that," he said, when asked about a possible backdating.

Shaun Moore, of Quilter, said: “Lower allowances and higher interest rates mean you will likely find that your personal savings allowance, CGT annual exempt amount and dividend allowance will be decimated very quickly. Even only relatively small gains can waste huge amounts of your allowances next tax year and therefore the sooner assets can be in a tax-sheltered environment like an Isa the better.”

Sir Keir Starmer, who won the General Election back in July, defeating the Conservative Party government, has warned the Budget on October 30 will be “painful” as he paved the way for tax rises. Isas remain the most effective way to shield your savings and investments from any tax changes.