Are my one-year fixed cash ISAs at risk if they mature post Budget?

Q: I have three fixed one-year cash ISAs. Are these at risk if they mature post Budget?

A: Your question refers to speculation that the Chancellor plans to reduce the amount people can save into cash ISAs in the Autumn Budget. The government had been expected to announce a cut in the amount cash savers can hold in tax-free ISAs at the annual Mansion House address this week. Now that plan has been shelved, with the Financial Times reporting ‘differing views’ within government about how to proceed. The change remains on the table, however, with officials due to consult further with the savings industry.

Rachel Reeves has stated she wants to encourage more investment into the economy to drive growth, so it’s not hard to see why many suspect she’ll restrict the ISA tax break for those who are saving money into a deposit account.

• Read: What can we expect in the Autumn Budget?
• Read: How might the Government change Cash ISAs?

However, even if this limit is pared back, this shouldn’t affect savers who already hold cash ISAs — including those in fixed-rate products. However, care needs to be taken when moving money once these accounts mature.

Currently, adults can contribute up to £20,000 a year into an ISA. This can be into a stocks and shares ISA, a cash ISA, or a combination of both.

Those who take out a fixed-rate cash ISA typically lock their money away for a period of time, typically between one and five years.

On maturity, the provider will typically move funds into an ‘easy access’ ISA, paying a lower rate of interest. If this run-on rate does not look particularly attractive, savers have the option to transfer it to another ISA product. This doesn’t have to be with the same provider, but check first that a new provider accepts transfers into the specific product you want.

If you are transferring an existing ISA account this isn’t counted as a new subscription — so won’t eat into your ISA allowance for the current tax year.

However, you have to contact a new ISA provider and get them to transfer the funds. If you simply cash in an ISA, withdraw your money and then open a new ISA, this will be treated as a new ISA subscription. This could be a real problem if the cash ISA limit is scaled back in future.

Although tax rules change all too frequently, there is a convention that rules aren’t applied retrospectively. So even if Reeves does restrict how much you can save into cash ISAs in future, this shouldn’t impact funds that are already sheltered in these tax-efficient savings wrappers. Unless there is something really unprecedented int he Budget.

Provided you follow the transfer procedures correctly, you should be able to reinvest these on maturity without losing the tax-free status.

• Read: 7 investing rules of thumb
• Read: Top 10 best-selling ISA and SIPP funds this year
• Read: Cash ISAs: the real challenge for savers

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.