British Savers Could Face a Big Hit as Reeves Eyes Bold Plan to Push Money Into Riskier Investments

Investing can be good for the economy and, over time, it usually works out well for savers too. That’s why UK Chancellor Rachel Reeves wants Britons to stop stashing their money in cash and instead put it to work in homegrown businesses.

One of the ways she considered doing this was by slashing the annual £20,000 Cash ISA allowance to just £4,000 — a massive cut that would have hit cautious savers hard. While that proposal appears to be on hold for now, her message is clear: she wants people out of cash and into shares.

Through her Mansion House reforms, Reeves is also urging pension funds to invest more in UK stocks and even riskier areas like private equity. She says this will help boost growth, but critics warn the plan could easily backfire if British companies underperform. Private equity, in particular, carries far higher risks, and some believe her real motive is to increase tax revenue, reported by the Express.

There’s good reason to think the Treasury would benefit. UK investments are taxed in more ways than most people realize. While Reeves is right that investing can deliver bigger returns — historically, shares have beaten cash — the government takes a hefty cut along the way.

If an investor had maxed out a Cash ISA every year since they launched in 1999, they might have around £542,692 today, based on average savings rates. But if they’d put that same money into a FTSE 100 tracker fund, they’d be sitting on about £773,362 — a difference of £230,670. A US tracker would likely have made even more.

That’s the upside Reeves wants people to focus on. But here’s the downside: investing in shares exposes people to seven different tax hits. First, there’s income tax on the money you earn in the first place, then National Insurance, then a 0.5% stamp duty every time you buy UK shares.

Outside of an ISA or pension, you’re also taxed on dividends and capital gains. The tax-free dividend allowance has already been cut to just £500 a year, and the capital gains tax exemption was slashed to £3,000. Reeves even hiked CGT rates in her budget.

If you pass your investments down when you die, inheritance tax can take another bite. Spend your gains instead, and VAT adds yet another layer. That’s seven separate ways the government can tax your investments — and some MPs are pushing for a wealth tax, which would make it eight.

Taxes in Britain are already at their highest since World War II, and they hit almost every part of daily life: insurance premiums, air travel, fuel, property, alcohol, tobacco, gambling, energy bills — the list goes on.

For all her talk about encouraging investment, Reeves risks making it harder for savers to grow their money. If the government keeps piling on new taxes, there may not be much left for people to invest at all.