Rachel Reeves preps ANOTHER ISA overhaul after launching 22% tax raid on savings

Chancellor Rachel Reeves is preparing another ISA overhaul after the Treasury confirmed a 22 per cent tax charge on millions of savings accounts.The Treasury has launched a consultation on a new savings product designed to help first-time buyers get onto the property ladder, which would replace the existing Lifetime ISA.This comes after the Government department announced a 22 per cent levy will be imposed on the cash held on stocks and shares ISAs.Ms Reeves has come under fire over her changes to the ISA regime, having previously revealed the £20,000 tax-free allowance attached to cash allowance will be reduced to £12,000.These changes are set to come into effect from April 2027, but the Treasury has now launched a consultation on a new savings product designed to help first-time buyers get onto the property ladder, which would replace the existing lifetime ISA.However, the consultation document outlining proposed rules for the first-time buyer ISA has left several critical details unspecified, including the government bonus rate, annual contribution limits, and maximum property values that would qualify.The Government has indicated that existing Lifetime ISA holders will be permitted to continue saving into their accounts under current rules indefinitely.Ministers believe the Lifetime ISA has proven overly complex, with excessive numbers of savers incurring penalty charges when making unauthorised withdrawals from their accounts.LATEST DEVELOPMENTSMillions of Britons with £10,000+ in accounts missing out on interest as inflation erodes savingsNSI increases interest rates across range of accounts in boost for savers - full listSantander launches new savings account with 8 interest rate: 'Take action!'Rachel Vahey, head of public policy at AJ Bell, said the consultation provides an outline of the new product but omits essential information.She said: Today's consultation gives us the broad shape of the new 'First Time Buyer ISA,' but leaves us guessing on some of the most important aspects.Without detail on the level of government bonus, subscription limits or property price cap, it is difficult to judge whether this new product will be a meaningful improvement for aspiring homeowners. Ms Vahey noted that since the Lifetime ISA was introduced in 2017, it has supported thousands of young people in purchasing their first property.She acknowledged the product has never been without flaws, particularly the withdrawal charge that has created difficulties for savers needing to access funds for purposes other than buying a qualifying home or reaching 60.Jeremy Cox, the head of Strategy at Coventry Building Society, offered a more optimistic assessment while acknowledging existing shortcomings.He said: Lifetime ISAs have never been perfect, but they've helped many people take their first step onto the housing ladder. We welcome the consultation and will look to engage with government on their proposals. Our Standards: The GB News Editorial Charter