Banks lose millions on Labour’s cash Isa U-turn
Britain's banks have wasted millions of pounds after John Healey reversed plans to cut the annual cash Isa allowance.
It is understood that high street lenders spent significant sums preparing for the threshold to be cut from £20,000 to £12,000, including on marketing and technology.
A senior source at one high street bank said they had spent in excess of £10m on the changes.
However, that expenditure will now go to waste after the Chancellor scrapped the planned £8,000 cut for those under the age of 65.
The bank source said there had been a "considerable amount of wasted time, effort and money" across the City and that specific teams had been created to oversee the change in some high street lenders.
They were tasked with implementing a raft of technological changes to ensure high street banks' apps could adapt to the new threshold, which was set to come into effect in April 2027.
Marketing costs were also racked up to alert customers to the looming changes, some of whom may have already moved cash out to get ahead of the new rules.
The executive said: "There has been an impact on customers – potential confusion. Some have already acted in anticipation of the proposed change."
HM Revenue & Customs predicted in September that the changes would trigger £6m in set-up costs for lenders.
It comes at a time when banks are already having to wrestle with a looming increase in tax.
Mr Healey doubled the bank surcharge from 3pc to 6pc in Wednesday's Budget for a temporary period of 15 months.
The surcharge is levied in addition to corporation tax, which now stands at 25pc, bringing the total rate faced by the sector to 31pc – the highest level since at least 2015.
The last-minute changes to the cash Isa have frustrated firms well beyond the banking sector.
One of Britain's biggest wealth managers said adjusting to the new limit had taken up significant staff time.
Hargreaves Lansdown, the country's largest broker, launched a new money market fund just days before the Budget as a "workaround" to the cuts.
Fears of further about-turns have already prompted several banks to urge the Government to honour its pledge that the bank tax will be temporary, just days after it was announced.
Few areas of government policy have seen more changes than Isas.
The Lifetime Isa, intended for savings towards a first home and retirement, will last just 12 years before it is closed to new savers in 2029. The British Isa was scrapped before it ever reached savers.
In the Budget, Mr Healey announced a new "Starter Isa" intended to reward first-time investors, though he provided no details.
