ISA chaos as Rachel Reeves accused of 'punishing' savers with 22% tax raid

Chancellor Rachel Reeves has been accused of punishing savers with her looming 22 per cent tax raid on cash held in stocks and shares ISAs.Since Labour returned to Government in July 2024, Ms Reeves has had a controversial tenure at the Treasury and has unveiled major changes to the ISA regime.These include reducing the tax-free allowance attached to cash ISAs from £20,000 to £12,000 for those under the age of 65 and imposing a 22 per cent levy on money invested in stocks and shares ISAs.Currently, these policy changes are set to come into effect from April 2027, but both have provoked backlash from the City and Labour MPs.Speaking to The Telegraph, Labour's chairman of the Treasury select committee Dame Meg Hillier has expressed alarm at the direction of travel policy-wise.She said: I'm concerned this is breaking the Isa brand. Before, it was very easy for people to understand that when you put money in, there's no tax inside the wrapper. Dame Hillier added that the reforms were weakening that wrapper and it creates complexity. The package of measures extends beyond the new tax charge.Savers will face a prohibition on moving funds from stocks and shares ISAs into cash ISAs, while those under 65 will see their annual cash allowance slashed by 40 per cent.LATEST DEVELOPMENTSDonald Trump to hit UK with 100 tariff 'IMMEDIATELY' if Labour imposes taxKeir Starmer and Rachel Reeves face backlash from anti-monarchistsState pension to be taxed before retirees get paid in secret plan from Rachel ReevesTom Selby, the director of public policy at AJ Bell. described the reforms as a dog's breakfast, arguing that the ISA's popularity had always stemmed from its straightforward nature.He said: Dame Meg is absolutely right these reforms layer on unnecessary complexity when investors are crying out for simplicity, and hardening the border between short-term cash saving and long-term investing.Mr Selby accused ministers of choosing to punish those who don't use Isas in the way it wants, urging any future administration to reverse what he called needless and poorly designed changes at the first opportunity.The Treasury has defended the changes, with a spokesman arguing that parking cash long-term in a non-cash Isa to earn tax-free interest isn't investing. Officials maintain the reforms will encourage savers towards investments that genuinely grow their wealth, claiming support from Nationwide Building Society and the Building Societies Association.Despite criticism directed at Ms Reeves, analysts note that taxation within ISAs is not entirely unprecedented.Prior to former Conservative Chancellor George Osborne's simplification measures in 2014, cash held within stocks and shares ISAs attracted a 20 per cent levy. Our Standards: The GB News Editorial Charter