Savers could enjoy tax cuts worth tens of thousands of pounds under plans being discussed by Jeremy Hunt to raise caps on Isas.
Increasing the existing allowance by £10,000 to £30,000 could mean capital gains savings of £35,490 over 20 years for a higher rate taxpayer investing in stocks and shares.
A £5,000 rise would mean paying £17,970 less, according to figures compiled by Hargreaves Lansdown.
The Chancellor is considering overhauling the Isa system as part of an effort to encourage more investment in Britain, possibly by introducing an additional allowance beyond the existing £20,000 cap for those backing UK equities.
Savers do not pay tax on savings interest or capital gains accrued in Isas.
Around 800,000 individuals invested the maximum sum exclusively into stocks and shares Isas last year, according to official figures, meaning they could potentially benefit from an increase in the allowance.
Over a third – 310,000 – earned more than £50,000. Earning more than the higher rate tax threshold of £50,270 means paying a 20pc tax on capital gains.
The majority of people paying £20,000 into stocks and shares Isas earn less than £50,000.
They are mostly spouses of higher earners or people funding the investments with substantial cash savings.
Lower rate taxpayers, who pay 10pc on capital gains, would see £17,970 in savings over 20 years if the Isa cap was raised to £30,000 or £8,985 if it was raised to £25,000.
Hargreaves Lansdown’s calculations assumed a 6pc annual return with capital gains being realised on share price gains, rather than dividends.
Mr Hunt is keen to make it easier to invest in stocks and is considering an additional allowance for investing in UK companies, the Financial Times reported over the weekend.
Personal equity plans, which were superseded by ISAs in 1999, originally required a certain proportion of their assets to be in UK companies.
Mr Hunt is expected to lay out his plans in November’s Autumn Statement. Investment executives have warned that a separate allowance for UK companies could make the system more complex.
Harriet Baldwin, the chair of the Treasury Select Committee, said: “Our tax system is too complicated,” saying there is “ample scope” to simplify the system.
James Ashton, of the Quoted Companies Alliance, said: “If we are serious about reviving our public markets then steering tax-efficient Isa funds towards UK stocks makes great sense.”
A Treasury spokesman said: “HMT is receptive to ideas of how we can make ISAs more attractive to encourage people to develop a savings habit and to invest in a way that works for them.”