Labour’s changes to Isa rules in the Budget were “absolutely bonkers”, the chief executive of AJ Bell has said.

Michael Summersgill, who runs the DIY investment platform, warned that age-specific restrictions on the amount of money that can be placed in a cash Isa would add significant complexity to the market, deterring people from investing.

In last month’s Budget, Labour reduced the amount of money that can be saved tax-free each year in a cash Isa from £20,000 to £12,000 a year for those under the age of 65. The change was intended to encourage investment in stocks Isas instead.

From April 2027, those under 65 will also be unable to transfer from a stocks-and-shares Isa into a cash Isa.

In an effort to block individuals from circumventing the lower cash Isa limit by stuffing cash into a stocks Isa but leaving it uninvested, HMRC will also levy a charge on the interest paid by these accounts.

Referring to the changes, Mr Summersgill said: “It’s absolutely bonkers. We’re looking for simplification to remove all of the barriers and complexities that stop people from investing and we’ve got the complete opposite to that.

“The aim was correct. So how we’ve ended up at completely the opposite end of the spectrum, how they’ve got this lost along the way, I’ve got absolutely no idea.”

Mr Summersgill said the charge on interest paid on cash in stocks and shares Isas would act as a deterrent to investment, rather than encourage people to put more into stocks and shares.

He added: “It’s basically a tax which is unprecedented. Nobody’s ever done that before and I see that as incredibly unhelpful complexity.

“If you’re a first-time investor, one of your first experiences of investing through a stocks-and-shares Isa going forward will be HMRC levying a charge against the little bit of interest that your platform provider pays you on the cash that you have sat in there until it’s invested.”

AJ Bell saw pension withdrawals rise by roughly £300m in September and October this year compared to the same period in 2024, amid fears that Rachel Reeves would tighten the rules around tax-free lump sum pension withdrawals.

Separate figures from Calastone found that UK investors withdrew £3bn from equity funds in November, the second-worst month on record after October, which saw a net £3.6bn of outflows.

Mr Summersgill called on the Government to explicitly rule out changes to the tax-free cash pensions withdrawal rules for the remainder of this parliament, in order to reduce future uncertainty.

The chief executive’s comments came as AJ Bell reported a record 18pc increase in revenues to £317.8m in the year to the end of September, with profit before tax rising by 22pc to £137.8m.

The wealth manager added 102,000 customers over the period, bringing the total number to 644,000. However, shares fell by 6pc amid concerns about rising costs as the company plans further investment in its platforms over the next year.

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