Chancellor Rachel Reeves confirms work is underway in the Treasury on the reforms

Labour is set to press ahead with controversial reforms to cash ISAs as chancellor Rachel Reeves confirms work is underway in the Treasury.

Ministers are understood to be looking at lowering the annual amount savers can invest in their tax-free cash ISAs in a bid to encourage them to consider investing in equities instead, like a stocks and shares ISA. Some economists have even advocated for the current £20,000 threshold to be cut to just £4,000.

Speaking to the Commons Treasury committee on 2 April, the chancellor said she doesn’t want to “rush” the changes but added: “I do think that reform would be worthwhile and that’s what we’re looking at at the moment.”

“I want to say that I do recognise the importance of cash for a lot of people,” she said. “Already, you can save in a savings account and some of that is tax-free, the interest on that is tax-free, and also we have got the ISA limits.

“But I do want to look at the balance, because I think sometimes it’s a disservice to people saving. If you think about the inflation we’ve experienced over the last few years, you’ve actually seen an erosion in the value of your savings in real terms.”

Any major reform would likely require legislative change. This means the next chance for the Treasury’s full plan for cash ISAs to be revealed will be at this year’s autumn budget, with consultations ongoing in the meantime.