Cash Isa Tax Break Cuts Could Harm First Time Buyers Says Nationwide

Britain’s largest building society has issued a stark warning about potential government plans to reduce tax breaks on cash Individual Savings Accounts (Isas), highlighting significant risks to mortgage availability for first-time homebuyers.

The controversy has intensified as Chancellor Rachel Reeves faces mounting pressure from City institutions to scale back or eliminate tax advantages on these popular savings vehicles, which currently serve almost 8 million savers annually. These firms advocate for increased focus on stock market investments, aligning with governmental growth objectives whilst potentially offering superior long-term returns.

Tax-free Isas, introduced in 1999, predominantly exist as cash Isas and stocks and shares Isas, with an annual allowance of £20,000. The scale of cash Isa holdings is substantial, with more than 18 million account holders collectively holding approximately £300 billion.

Tom Riley, Nationwide’s director of retail products, emphasised the dual benefits of cash Isas, stating they support both efficient individual saving and enable substantial first-time buyer lending. The building society, which recently expanded its lending criteria to offer up to six times income for first-time buyers, warns that restricting these accounts could severely impact aspiring homeowners.

The Building Societies Association has formally opposed any potential restrictions, with chief executive Robin Fieth expressing strong disagreement with City firms’ proposals. Leeds Building Society’s Andy Moody echoed these concerns, predicting significant negative consequences for mortgage lending if cash Isa rules were altered.

Whilst some financial institutions, including Phoenix Group, advocate for a balanced approach rather than complete removal of cash Isas, the debate continues to intensify as the government weighs various options to stimulate economic growth whilst protecting essential funding sources for property lending.