Martin Lewis breaks silence with scathing 4-word verdict on Cash ISA 'mistake'

Personal Finance expert Martin Lewis has slammed the reports that Rachel Reeves is planning to announce a cut to Cash ISA limits calling it "p*** people off economics". Writing on X after the reports surfaced, the Money Saving Expert said: "Reports Rachel Reeves will announce a cut to the cash ISA limit at her July 15 Mansion House speech. If true, I think it's a mistake. I doubt it'll substantially nudge people to invest, not save; said to be the aim. This isn't nudge economics, its piss people off economics.

"Currently, you can put £20,000 in tax-free ISAs, whether cash (savings) ISAs, shares (investments) ISAs or the smaller types. It's said the reduction'd only be for cash ISAs, so people can still invest the same tax-free. NB At this point I should note, it is very likely to only impact future ISA limits (though whether the cut would start this tax year is a big question), so those with money already in cash ISAs shouldn't panic."

He continued: "My suspicion is that for many who use cash ISAs, it will just result in them having to pay more tax on their relatively paltry savings interest, not having an epiphany and thinking, 'Oooh, I'll just fill up the remainder of my ISA allowance with investments instead'.

"Now I should note, I am in favour of encouraging people to invest in the UK. It's good for individuals over the longer term and for the economy, especially if a way is found to encourage people to invest in UK firms. Yet this isn't the route to do that.

"I'll be disappointed if the Chancellor chooses to listen to the big investment firms in the City, and shut down many building societies and consumer groups who've said it's not a good route. Instead, let's start a conversation about how we encourage investments, even possible intervention when people save, to explain other options.

"We need to educate, provide better 1-on-1 easy guidance, and start to change the way people think about risk. But let's use the carrot, not a stick."

This comes as the Chancellor is poised to reduce the £20,000 tax-free cap, though she previously said she would not slash the amount that can be paid into ISAs.

A Whitehall source told the Financial Times that negotiations are still ongoing regarding the new cap. It would represent the biggest ISA overhaul since they came into force in 1999 under Gordon Brown.

Ms Reeves reportedly believes that the plan will spur investment in British companies and boost the stock market by encouraging people to put their money in shares.