Has Rachel Reeves really ruled out a £4,000 cash ISA limit?

Chancellor Rachel Reeves is reportedly set to launch a review of the ISA market in a matter of weeks, as she looks to push people to invest more into UK stocks and shares and save less in cash.

In the Spring Statement in March 2025, the Treasury said the government wants to “get the balance right between cash and equities to earn better returns for savers” and “boost the culture of retail investment”.

Speculation has been mounting since then about what changes to the ISA regime could look like.

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The annual cash ISA limit, for example, could potentially be cut to just £4,000 from its current £20,000, as has been rumoured since the start of the year when Reeves was lobbied by certain City firms to drive more retail investment into British stocks.

If a reform similar to this is enacted, it would mark one of the biggest shake-ups to the UK’s savings market since ISAs were introduced in 1999.

The uncertainty over the future of cash ISAs even led to ISA savers pouring in an additional £4.2 billion (a 31% year-on-year increase) before the end of the last tax year.

But, it looks like the overall £20,000 ISA limit is to stay. Reeves clarified this on 19 May in an interview on the BBC’s podcast ‘Newscast’.

The chancellor said: “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.”

The chancellor also clearly stated that the current overall ISA limit was not going to be reduced.

“I absolutely want to preserve that £20,000 tax-free investment that people can make every year,” she said.

Though a confirmation that the limit a saver can put in an ISA will not be reduced was welcome, Reeves made no clear statements about the potential of reducing the proportion of that £20,000 that could be held in cash.

While some commentators have taken this to mean that the cash ISA limit will not be reduced, it is clear that Reeves has chosen her words carefully in this instance, not ruling out the possibility of altering the cash limit.

Rachel Vahey, head of public policy at AJ Bell, echoes this, welcoming the commitment to keeping an overall £20,000 limit.

Vahey says: “This commitment doesn’t necessarily mean the idea of a lower allowance for only Cash ISAs is off the table. The Treasury will be looking at a range of solutions in their quest to get a better balance between cash and equities in ISAs.

“A lower limit for just Cash ISAs, though, is likely to be a lose-lose for everyone. It will fail to encourage the behaviour outcome the Treasury is looking for.”

When could cash ISA reform be announced?

While there is no official timeline yet, it is expected that a consultation will be announced which considers the implications of reforming the ISA.

The chancellor’s Mansion House speech, pencilled in for July, could be used to launch this consultation.

The Treasury said no decisions have been made, but officials are engaging with stakeholders about how to drive more retail investment into London-listed stocks.

If a consultation is announced at Mansion House and cash ISA reform is considered, then it could still be some time before it is implemented.

A reform of this size would be expected to be announced at a large fiscal event.

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. The Autumn Budget is usually held in late October or early November.

Will Rachel Reeves cut cash ISA limit to £4,000?

Speculation about a specific cash ISA limit first emerged in early 2025, when it was reported that Rachel Reeves was being lobbied by some figures in the City to create a £4,000 annual cash ISA allowance.

Economic secretary to the Treasury Emma Reynolds added to the speculation when she told the Treasury Select Committee inquiry on 23 April that the government is interested in “boosting the culture of retail investment

“We will be looking at the advantages and perhaps downsides of all the different ISAs alongside our primary objective to improve living standards through better economic growth.

“We know there are many people putting cash aside who could consider and might consider investing in stocks and shares…but perhaps lack the confidence,” she concluded.

Now, with the possibility of a consultation on ISA reform being tabled in July, it seems like cash savers should explore their options in the stock market.

While holding cash certainly has some benefits, such as the security and liquidity it brings, research from AJ Bell shows that cash savers are paying the price for staying out of the stock market.

Cash ISAs have lagged the returns of stock market funds since the ISA was launched in April 1999.

The figures show that £1,000 saved every year in a cash ISA since April 1999 when the product was launched, and earning the average cash ISA rate over that almost 26-year period, would have turned into £34,392.

However, if that same £1,000 a year was invested in the average return of the IA Global sector it would have turned the £26,000 investment into £83,603.

While a limit could dismay savers, experts have suggested a reduced cash ISA allowance might not be that worrying.

Could a £4,000 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.

This boost would be welcome as the UK stock market remains unloved compared to its peers in the US and many companies are even favouring the New York Stock Exchange over London.

When questioned over the potential allowance cut in February, Reeves said: “It’s really important that we support people to save to achieve their aspirations.

“At the moment, there is a £20,000 limit on what you can put into either cash or equities [ISAs], but we want to get that balance right.

“I do want to create more of a culture in the UK of retail investing like what you have in the US, to earn better returns for savers.”