Calls to raise tax-free allowance for cash

In a submission made to the Chancellor ahead of the Autumn Statement on 5 December, the trade body for the UK’s banks said that savers should be allowed to place their entire tax-free amount allowed, rather than half that level, in cash.

The current cash allowance is £5760 and the total current Isa allowance is £11,520. The changes would allow people to invest the whole amount within a cash Isa.

The 13-page submission, seen by Financial Adviser, stated: “Any plans to limit the amount that savers can hold in these tax-free accounts risks damaging the Isa brand which has been carefully nurtured as a key part of the UK’s long-term savings planning since Isas were introduced in 1999.

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“A new Isa ‘savings cap’ would raise doubts on the stability of the regime going forward and discourage saving, as there would be a perception that the cap would be reduced over time following the experience of the pensions regime.”

Savers can also only transfer funds from the cash to the stocks and shares version of the product, but the BBA has called for this to be changed so funds can flow in both directions.