Will Rachel Reeves impose a £5,000 cash ISA limit?
The chancellor has delayed plans to cut the cash ISA limit, but the reform is still reportedly on the table. We look at why, and what it could mean for your savings.


Marc Shoffman
Plans to reduce the annual cash ISA allowance are seemingly on ice for now, but reforms could still be on the way over the longer term.
The chancellor was expected to announce that the proportion of your £20,000 ISA limit that you can save into a cash ISA will be cut, possibly to as little as £5,000, at her Mansion House speech on 15 July, but reports now suggest she has delayed the cut.
While cash savers may welcome the decision, the prospect of ISA reform isn't off the table forever.
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The Treasury is taking more time to consult figures in the savings and investment industries about the repercussions of the change. An announcement is no longer expected at Mansion House, but the cash ISA limit still seems set for a cut or other significant reform as the chancellor seeks ways to boost retail investment in Britain.
This would mean that if savers want to use their full ISA limit to make the most of the tax-free savings they will have to put most of it into a stocks and shares ISA.
Reeves’ reasoning behind reducing the cash ISA limit seems to be that such a move could incentivise savers to put their money into a stocks and shares ISA instead, with the aim of propping up the British stock market.
The chancellor previously said in March that she was seeking to “get the balance right between cash and equities to earn better returns for savers” and “boost the culture of retail investment”.
If Reeves goes through with these plans and reduces the cash ISA limit, it would mark one of the biggest shake-ups to the UK’s savings market since ISAs were introduced in 1999.
Though the proportion of your ISA limit that you can save in cash seems set to be reduced, Reeves has previously ruled out a reduction to the overall £20,000 ISA limit which can be spread across the four different types of ISA – cash, stocks and shares, innovative finance, and lifetime.
In May, the chancellor told the BBC: “I’m not going to reduce the limit of what people can put into an ISA, but I do want people to get better returns on their savings, whether that’s in a pension or in their day-to-day savings.
“A lot of money is put into cash or bonds when it could be invested in equities, in stock markets, and earn a better return for people.
“I absolutely want to preserve that £20,000 tax-free investment that people can make every year,” she said.
Some commentators have called for Reeves to leave the cash ISA limit alone, with Sarah Coles, head of personal finance at Hargreaves Lansdown, saying: “Cash ISAs are often a first port of call when people are starting out, and they’ll often gradually move over into investments as they find their feet.”
Cutting the cash ISA allowance, though, would mean those people “have less available to transfer into stocks and shares ISA – effectively reducing investments rather than boosting them,” Coles added.
When could a cash ISA reduction come into effect?
With an announcement of a cut seemingly ruled out for her address at Mansion House on 15 July, the next-most likely time we will hear about the shakeup seems to be in the run-up to the Autumn Budget.
This is because a reform of this size would be expected to be announced at a large fiscal event, and the next planned fiscal event is the Autumn Budget. This usually takes place in late October or early November.
Reeves has previously stated she is committed to only one large fiscal event a year, the Autumn Budget, in order to provide certainty and stability in markets.
Could a £5,000 cash ISA limit help the UK stock market?
Campaigners have suggested an annual cash ISA limit would encourage more people to put their yearly tax-free ISA allowance into a stocks and shares ISA, which would also boost the UK economy.
The Treasury seems to be open to these suggestions, following months of lobbying by City groups.
If savers do end up redirecting their cash ISA holdings into British stocks and shares it would mark a welcome boost to the UK stock market which is relatively unloved when compared to its peers in the US.
A recent campaign by investment platform IG argued that a reduction in the amount you can put in a cash ISA, as well as the removal of stamp duty on shares, is one way to save the UK stock market.
Furthermore, some experts have suggested that a reduced cash ISA allowance may not be that worrying, as stocks and shares tend to provide greater returns over the long term, and there are certain low-risk options that you can hold in a stocks and shares ISA.
However, while a redirection of ISA funds into equities would certainly be a boon for the London Stock Exchange, other groups seem sceptical about whether savers who do end up putting more money into stocks and shares will favour UK-listed companies.
US-listed stocks can be held in the stocks and shares ISA, and these firms have historically provided better returns for investors than UK-listed companies.
The S&P 500, a stock market index that tracks the performance of 500 of the US’s largest companies, has provided annualised returns of 15.5% over the past five years.
Meanwhile, the FTSE 100, which tracks the performance of 100 of the UK’s largest firms, has provided annualised returns of 13.2% in the last five years.
With better returns on your investments available elsewhere, there is no guarantee that there will be a large inflow of investment into London-listed stocks rather than those listed elsewhere in the world.
Brian Byrnes, head of personal finance at Moneybox, has also cast doubts over whether cash savers will actually move their money into the stock market.
“Simply cutting the tax-free allowance on cash ISAs will not necessarily prompt equal inflows into investing products either,” he said.
“People opt to use cash ISAs over their stocks and shares counterparts for a multitude of reasons, including risk aversion, and reducing the amount of money these savers can put into the cash ISA is unlikely to change this mindset.”
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Daniel is a digital journalist at Moneyweek and enjoys writing about personal finance, economics, and politics. He previously worked at The Economist in their Audience team.
Daniel studied History at Emmanuel College, Cambridge and specialised in the history of political thought. In his free time, he likes reading, listening to music, and cooking overambitious meals.
- Marc ShoffmanContributing editor
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Reeves delays cash ISA reform, but savers are not out of the woods yet
The chancellor has reportedly delayed plans to cut the cash ISA limit, which were set to be announced at Mansion House on 15 July, and will take more time to consult with the industry