Tech bosses back Rachel Reeves’ plans to overhaul cash Isas

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More than 50 tech founders and bosses have backed Rachel Reeves’ plan to overhaul tax-free Isas and divert billions of pounds of savings from cash into domestic stocks as the chancellor prepares to face down her critics in next month’s Budget.

Reeves’ allies have urged business to support the planned reform, which includes halving the tax-free limit for cash Isas from £20,000 to £10,000, to help the UK chancellor fend off criticism from building societies and MPs.

“We can’t win the argument on our own,” one colleague of the chancellor told the Financial Times this month in anticipation of a backlash to the idea. “Lots of businesses support the idea but never say it.”

Now 56 CEOs from Tech Nation, a body that champions innovative companies, have signed a letter backing Reeves as she prepares to reshape the Isa landscape to channel funds to UK companies.

“While a reduction in the tax-free allowance for cash Isas may encourage more investment, it will only be effective if introduced alongside new investment routes that ensure redirected savings genuinely support British innovation,” they wrote.

The letter, seen by the FT, adds: “We are calling for the creation of dedicated mechanisms within the Isa system that channel capital into UK tech and growth-stage businesses, as well as an expansion of Isa eligibility to include investment in UK innovation funds.”

Signatories include Brent Hoberman from the Founders Forum Group, Jimmy Williams of Urban Jungle, Octavius Black of MindGym, Louise Hill of GoHenry, Farzana Rahman of Hexarad, Euan Blair of Multiverse, Timo Boldt of Gousto and Aron Gelbard of Bloom & Wild.

As part of Reeves’ planned Isa overhaul, first reported by the FT, she is considering new measures to boost UK share ownership, including a requirement to hold a minimum amount in British companies and a stamp duty break.

The idea, an evolution of the previously abandoned Conservative plan to create a “Brit Isa”, has seen the Treasury discuss removing stamp duty tax at 0.5 per cent on London listed stocks that are held within Isas.

Reeves will not cut the overall Isa tax-free savings limit of £20,000 but wants to shift the tax breaks to reward more investment in stocks, both to increase returns for individuals and to boost the UK economy.

The chancellor is said by allies to be determined to push through the reforms in the face of criticism from building societies, which claim that cutting the annual cash Isa allowance could force them to reduce mortgage lending, hitting first-time buyers.

Reeves’ allies are assembling evidence to challenge that claim, including data that suggests there was no significant rise in the availability of mortgage products when the cash Isa tax-free limit was previously increased in 2017.

They also argue that there has already been a big increase in savings going into cash Isas in recent years and that the taxpayer should expect a better return for the overall UK economy from the tax breaks on offer.

The Treasury declined to comment on Budget “speculation” but a spokesperson said: “We want to get the balance right on Isas, protecting small cash savers while helping people’s money work harder for them and the economy.”

Robin Fieth, chief executive of the Building Societies Association, said: “Cutting the cash Isa subscription limit would directly lower inflows into cash Isa products, forcing lenders to seek more expensive taxable savings or — for some — wholesale funding sources.

“This would place upward pressure on mortgage rates across the economy. If there was a significant reduction in the amount saved in cash, there will simply be less money available to provide mortgages.”

Last week the Commons treasury committee also argued against cutting the cash Isa allowance, arguing that improved financial education was a more effective way to persuade savers to invest in stock markets.