New ISA rule under Labour will hand people £5,000 each from next month

Reports - yet to be confirmed by Chancellor Rachel Reeves - hint the plans for a Conservative Party created British ISA have been axed.

Savers face a "sting in the tail" under the new Labour Party government, it has been warned, as a lifetime cap could hit all people in the UK. Reports - yet to be confirmed by Chancellor Rachel Reeves - hint the plans for a Conservative Party created British ISA have been axed.

Private wealth tax partner, Elsa Littlewood, said: "This could feasibly be presented under the guise of ‘simplification’, or as part of a wider ranging reform to the ISA regime. While savers may be hoping that the originally proposed additional £5,000 per year allowance for the UK ISA would be added to the current £20,000 annual ISA limit, there could be a sting in the tail.

"It’s not impossible that the Chancellor could seek to impose a lifetime cap on ISA saving – perhaps set at around £500,000. If this were to happen, we would hope that the limit would be indexed to rise in line with inflation."

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She explained: "We could also see a reduction in the annual allowance available for cash ISAs, but an increase in the annual allowance for stocks and shares ISAs in an effort to support economic growth. We may also see changes to the rules on the usage of Lifetime ISA funds. Currently, these funds can be used by first time buyers for properties worth £450,000 or less."

Ms Littlewood went on and also said: "With rising property prices, this can limit options for first-time buyers, particularly in London and the South East, and the penalties can be quite punitive for those who find themselves in this position."

The warnings come ahead of Ms Reeves delivering her Autumn Statement and fiscal Budget next month, on October 30. Ms Reeves and Sir Keir Starmer, the Labour Party government leader, have warned there are some tough decisions to be made.

The pair have already axed £300 Winter Fuel Payments for pensioners.