Millions of savers could be hit with a "punishing new tax" as Chancellor Rachel Reeves considers cutting the tax-free allowance for Cash ISAs.
The proposed changes, which could see the annual limit drop from £20,000 to just £4,000, have sparked fears that households may lose out on thousands in tax-free interest.
Some 1.2million Scots could be hit by proposed changes, losing thousands of pounds, the SNP has said.
Savers could lose up to £5,132 to tax over a five-year period if the allowance is reduced to £4,000 a year – assuming there is a five per cent interest rate and annual deposits of £16,000, research commissioned by the SNP found.
Martin Lewis, the MoneySavingExpert has already expressed concern, while building societies report being "inundated" with worried customers.
There have even been rumours the tax-free allowance could be scrapped altogether.
Cash ISAs are individual savings accounts that allow people to earn interest without being taxed
GETTY
Dave Doogan, SNP economy spokesman MP said: “The Labour Party must ditch its damaging plans to impose a punishing new tax on savers, which would clobber more than a million Scots and could cost many households hundreds or thousands of pounds.
“This is yet another broken promise from the Labour Government, who said they wouldn’t increase taxes on families but are now dipping their fingers into people’s hard-earned savings.”
Cash ISAs are individual savings accounts that allow people to earn interest without being taxed.
House of Commons Library research shows 25 per cent of Scottish adults currently have cash ISAs.
LATEST ISA DEVELOPMENTS:
ISA products are useful savings accounts for those looking to avoid pay tax on interest GETTYScottish savers are thought to have £52.7 billion in ISAs, with an average of £39,917 per account.
Reeves has spoken of wanting to foster "a culture in the UK of retail investing like what you have in the United States".
However, Doogan pointed out that the UK already ranks low among European countries for household savings.
While the UK's figure stands at just two per cent, countries like France, Germany and the Netherlands all save above 10 per cent of household disposable income.
The proposed changes could see the annual limit drop from £20,000 to just £4,000
GB NEWSHe said: "Voters were promised things would get better but under the Labour Government the cost of energy, food and living is soaring.
"The tax-free allowance for cash ISAs should not be cut and people should not be forced into riskier or most costly savings products."
He added: "The UK economy is stagnating, unemployment is rising, and now the Chancellor wants to slash people’s savings too. It stinks."
