Labour’s hidden £975m tax hit on Isa savers

Sarah Coles, from Hargreaves Lansdown, said: “Providing benefit certainty until 2030 provides much-welcomed stability to this cornerstone of the people’s finances.

“The downside to this confidence is that over time the benefit will continue to decline in real terms and become less valuable.”

Few savers put the maximum amount into Isas each year. The average adult deposit last year was £5,797.

There were concerns Ms Reeves would reduce the amount she could save in her Isa over her lifetime. She had previously called for a £500,000 limit and wrote in a newspaper column for The Independent said in 2016 that the Isa system needed a “overhaul”.

However, no major reforms were announced in the Budget and a lifetime cap will not be introduced. The only change was the expected abandonment of Jeremy Hunt’s planned Great British Isa.

Isas were introduced in 1999 to replace personal capital plans (Peps) which were introduced by then Chancellor Nigel Lawson. The investment Isas allowance was initially £7,000 and the cash Isas was £3,000. These restrictions remained in place for nine years before numerous changes were made between 2008 and 2017.

Duty Free Wraps are a popular savings product used by more than half of the adult population. Official figures show that the value of all adult Isas in the UK is £726 billion.

Ms Reeves’ decision to freeze annual deposit limits until 2030 marks a record period of time for Isa premiums to remain unchanged.

Budget documents show the Treasury will earn £15 million in 2026-27, £90 million in 2027-28, £265 million in 2028-29 and £605 million in 2029-30 thanks to the benefit freeze.

A Treasury spokesman said: “The average subscription is around £6,000 across all ISA types, making the £20,000 limit suitable for the vast majority of savers.”