Approximately 5.2 million UK households could face their savings being targeted by HM Revenue and Customs (HMRC) ahead of the Autumn Budget.

Chancellor Rachel Reeves will unveil her Autumn Budget on Wednesday, November 26, with Cash ISAs potentially being affected on the day.

Research from Paragon Bank has shown that £516 billion across 5.2 million non-ISA accounts generates annual interest exceeding the £1,000 threshold for basic-rate taxpayers.

At present, people can save £20,000 annually without facing tax on their savings, but this could potentially be reduced to as little as £10,000.

Amongst ISA savers, 58 per cent are unwilling to move funds to stocks and shares alternatives if limits were lowered, with this figure climbing to 74 per cent amongst older generations, reports Birmingham Live.

Andrew Wright, head of Savings at Paragon Bank, cautioned: “With interest rates having recovered from historic lows and the Autumn Budget just around the corner, millions of savers are leaving themselves exposed to unnecessary tax bills.Time is running out, and with speculation that ISA thresholds could be cut and the Budget just days away, the window to shield your savings from tax could soon narrow.”

Chris Irwin, director at Yorkshire Building Society, said: “People are looking for stability and reassurance, and the continued uncertainty around ISAs isn’t helping.

“At Yorkshire Building Society, we’re standing up for our savers and campaigning to protect savings allowances. We’re committed to helping people continue to build financial security and navigate life’s challenges.”

Yet for those taking their first step onto the housing ladder or putting money aside for retirement, the Lifetime ISA – commonly known as a LISA – offers an alternative option.

The scheme permits savers to deposit up to £4,000 each year, with the Government providing a 25 per cent top-up – meaning you could receive £1,000 annually if you contribute the maximum amount to your LISA.

The drawback is that Britons encounter a 25 per cent withdrawal charge which not only eliminates the Government bonus, but also eats into your initial savings.

Martin Lewis has been urging Labour to reform the Lifetime ISA, including increasing the property price cap and adjusting the penalty so that savers don’t forfeit any of their original contributions.

In a post shared on X last week, he said: “I think we may finally see some changes to the Lifetime ISA in [this week’s] Budget.

“Currently, if you try and use your savings to buy a property over £450,000, never mind you don’t get the 25% bonus, you have to pay an effective fine of 6.25% of your money to the state.

“I think one of two things will happen (I’ve been pushing for them): They get rid of the fine if you’re buying a bigger property (so you don’t get the bonus, but do get all your money back).

“They increase the threshold to somewhere in the £500,000s (which is where it would be with inflation if it’d increased since 2017 when it was launched). Or maybe both – nah actually – unlikely, only one!”.