Savers may soon face major changes to their tax-free savings as new reform proposals come under review.
At the start of the year, rumours circulated that the chancellor was considering lowering the annual cash ISA allowance from £20,000 to £4,000. This was later seemingly ruled out, probably due to the backlash. However, it appears further tinkering could be on the horizon.
£10,000 cap on cash ISAs?
In an effort to stimulate the UK economy and drive greater investment, New Financial - a leading City think tank - has suggested overhauling the ISA system and potentially redirecting up to £10 billion each year into the London Stock Market. Whilst the current £20,000 ISA allowance would stay in place, it’s proposed that to achieve this economic shot in the arm a cap of £10,000 would be placed on cash-only ISAs (currently the full £20,000 allowance can be allocated).
Solomon Global’s Managing Director, Paul Williams, commented:
“City think tank New Financial’s proposal to cap cash ISAs at £10,000 and divert the rest into UK equities might serve the markets and potentially give Chancellor Rachel Reeves a PR win on economic revival, but it does little for individuals seeking financial stability. Shares can offer growth, but not everyone wants to ride out market swings or track every tick on a chart to keep their tax-free benefits.
If this reduction goes ahead, savers may increasingly turn to gold to make up the difference. Physical gold, in the form of legal tender coins like Sovereigns, Britannias and the Queen’s Beasts series, provides a simple, CGT-free option with no limit and no reliance on corporate performance. For many, gold isn’t just about chasing returns (gold has seen a 43% increase in the last year), it’s about preserving wealth, outside the whims of the government. While ISA rules can be redrawn with every Budget, the tax treatment of UK legal tender bullion coins has remained consistently favourable, making them a robust choice for long-term investors.”
Gold versus ISAs
As the government weighs its options, the future of ISAs and their role in supporting long-term financial growth remains uncertain. For those seeking to safeguard their savings amid a shifting policy landscape, adding gold to their portfolio could be an attractive proposition for wealth preservation, especially when compared to the more modest returns on offer from ISAs.
As MoneyMagpie highlighted, if you had invested £10,000 in a fixed-rate Cash ISA (1-year term) at 5% interest in March 2024, you’d have circa £10,500 after a year. In contrast, a £10,000 investment in gold over the same period would have grown to approximately £13,800.
Further reading:
Daily Express – Rachel Reeves told to cut Cash ISA limit to £10,000 as changes still on table.
Kitco – Will Gold become an attractive savings vehicle in the UK? Gov’t looks to shake up Cash ISAs.
Disclaimer: This blog is for informational purposes only and does not constitute financial advice. Buying physical gold as an investment involves risk, as the value of precious metal prices can be volatile. Historical financial performance does not necessarily give a guide of future financial performance. We recommend that you conduct your own independent research and seek professional tax, legal and financial advice before making any investment decisions.
