Financial analysts are warning that a potential Chancellor Rachel Reeves tax raid on ISAs could "raise mortgage costs" in a blow to homeowners.
Speculation is rife that the Chancellor may reduce the £20,000 tax-free Cash ISA allowance, despite her previous assurances that she would not cut the amount that can be paid into ISAs.
Rob Mansfield, an Independent Financial Advisor at Rootes Wealth Management, described the potential move as a "sly tax grab" that could force savers to hold more money in regular bank accounts where they would pay tax on interest.
The warnings come as speculation mounts about possible reforms to cash ISAs, with experts advising savers to consider alternative options to protect their money from potential changes.
Analysts are sounding the alarm over the consequences for mortgages if the Chancellor implements a tax raid on ISAs
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Mansfield said: "If this happens, it feels like a sly tax grab, as I suspect people will end up holding more cash in regular bank accounts and paying tax on their interest."
He advised savers to consider alternatives, noting: "When thinking about an ISA, most people only think of Cash ISAs, but investment ISAs have been around for years and can work really well."
The financial advisor recommended that concerned savers should explore moving their money to investment ISAs or Premium Bonds to avoid potential tax implications if the Chancellor proceeds with reducing the cash ISA allowance.
Rachel Springall, a finance Expert at Moneyfactscompare, warned that reducing the tax-free threshold could have serious consequences for the housing market.
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Britons are concerned about rising mortgage costs GETTY "Slashing the cash ISA allowance could also raise mortgage costs, with various mutuals making it clear how vital cash ISAs are as a source of funding, which will cause chaos in the housing market," she said.
Springall cautioned that any reforms must be carefully considered, noting that many savers simply do not want to invest their money on the stock market.
She emphasised: "Clearly, there will be consequences if any cut to the cash ISA allowance has not been thought out thoroughly."Ms
Springall suggested the Labour Government could encourage investment without penalising cash savers.
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ISAs are useful tools for those looking save and avoid paying taxGETTY"One way that the Government could encourage saving in a stocks and shares ISA would be to offer a short-term government bonus for investing in UK stocks, like they do to entice savers to take out a Lifetime ISA."
She also proposed reducing management fees for UK fund investments to attract savers.
However, she stressed: "Ultimately the Government has a goal to stimulate growth, but they must not penalise savers who have no desire to invest.
"It's vital that they tread carefully with any reforms and ensure they review the financial education surrounding investing to protect consumers."
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