Britain’s largest building society has voiced concerns over potential changes to tax benefits on cash Isas, warning that such a move could reduce mortgage availability for first-time buyers.
Reports suggest that Chancellor Rachel Reeves is facing pressure from City firms to scale back or eliminate tax breaks on these savings accounts, which are used by nearly 8 million savers annually. The push comes as part of a broader effort to encourage investment in the stock market, aligning with the government’s goal of boosting economic growth and offering potentially higher returns to individuals over time.
Cash Isas, introduced in 1999 alongside stocks and shares Isas, currently allow savers to deposit up to £20,000 per tax year without paying tax on interest earned. More than 18 million people hold cash Isas, with a combined value nearing £300 billion.
Last week, Economic Secretary to the Treasury Emma Reynolds questioned the role of cash Isas in an era of high inflation, telling a House of Lords committee: “Why do we have hundreds of billions of pounds in cash Isas? … What can we do together in parliament about trying to drive an investment culture that realises cash is not a good investment, especially in a high-inflation environment?”
However, cash Isas serve as a crucial funding source for banks, building societies, and other financial institutions, which use the deposits to finance loans for households and businesses.
Tom Riley, director of retail products at Nationwide, emphasized their importance, stating: “Cash Isas not only help ordinary people save efficiently but enable us to fund our first-time buyer lending. Any limitations on lending would further impact those looking to get a foot on the housing ladder at a time when saving for a deposit remains a significant challenge.”
Nationwide, one of the UK’s biggest mortgage lenders, has seen strong growth in both home loans and deposits. In a move to support first-time buyers, the lender recently announced it would allow mortgage applicants to borrow up to six times their income—an unprecedented step for a major high street lender.
Other building societies have also expressed concerns. Andy Moody, chief commercial officer at Leeds Building Society, warned that undermining cash Isas could have a “significant detrimental impact on mortgage lending, including the thousands of first-time buyers we support every year.”
Chris Irwin, director of savings at Yorkshire Building Society, highlighted the financial consequences for savers, stating that removing cash Isas as a savings option would “have detrimental impacts on the financial wellbeing of many, along with increasing their tax liability.”
Nationwide’s comments follow a letter sent to the chancellor by the Building Societies Association (BSA), urging the government to retain cash Isas.
BSA chief executive Robin Fieth stated: “I am writing to put on record how strongly we disagree with the recently reported calls from City firms to restrict cash Isas.”
Meanwhile, Andy Briggs, chief executive of Phoenix Group, the UK’s largest long-term savings and retirement business, acknowledged the importance of cash Isas but encouraged the government to explore tax policies that better support long-term economic growth.
The Treasury has yet to respond to these concerns.
Stay tuned to London Pulse News for further updates on the ongoing debate over cash Isas and the potential impact of tax changes on first-time buyers and the wider housing market.
