Brits could see the annual cash ISA allowance halved, reports suggest, as chancellor Rachel Reeves tries to incentivise savers to invest in the stock market instead.
Rumours of a cash ISA limit have re-emerged, with the Financial Times suggesting the tax-free cash saving limit could be cut from £20,000 to £10,000. Potential changes could be announced as soon as the Autumn Budget.
It’s hoped the proposed reform would encourage UK savers to move more of their savings into the stock market, which the government argues would help boost economic growth while also providing better returns for savers.
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The chancellor told the BBC in May she is not looking at reducing the overall ISA limit of £20,000.
In March, Reeves said 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” in Britain.
The vast majority of Brits favour the cash ISA – out of 22.3 million adults who hold an ISA, 14.4 million only have a cash ISA.
At a recent Investment Association dinner, City minister Lucy Rigby said: “Someone who put away £1,000 in a cash ISA every April since 1999 would now hold about £34,000. If they had instead invested in a stocks and shares ISA instead, they could now have around £83,000—over twice as much.”
A Treasury spokesperson told MoneyWeek: “Cash savings are important for people looking to put cash away for a rainy day, and we will protect that. But the chancellor has been clear that she wants to get Britain investing again – so British companies can grow and British savers who choose to can get more in return."
Revival of cash ISA limit plans “really disappointing”
With cash ISA reform rumours rearing its head again, with some critics slamming the idea.
Andrew Gall, head of savings at the Building Societies Association (BSA), said: "It is really concerning to read in the papers today that Rachel Reeves is still considering cuts to the cash ISA limits.
"We always knew that the battle was not won, but what’s really disappointing is that the chancellor seems only to be listening to the investment businesses who would benefit from the changes.
"We absolutely support the calls for more people to invest, especially in the UK. Cutting the cash ISA limit simply won’t achieve that aim.”
Gall argued that cutting the cash ISA limit will undermine the “brilliant savings product”, make lending more expensive, and will make the ISA system more complex and expensive to administer.
"Starting to save is a crucial part of the journey to investing – undermining cash ISAs risks undermining the very investment culture that we should be trying to build on top of its strong foundations," he concluded.
When rumours of a cash ISA limit first circulated earlier this year, the BSA warned building societies use cash ISA deposits to fund mortgages and said a reduction in how much can be saved in one could therefore make lending more expensive.
In contrast, investing and trading platform IG said it supports a potential reduction in the cash ISA limit, arguing the product has “not only failed to improve people’s wealth but have steadily eroded it,” and adding that it is “completely incompatible with long-term wealth creation”.
Michael Healy, UK managing director at IG, said: “The chancellor is absolutely right to take aim at this outdated product – and she should go further by abolishing the cash ISA allowance altogether.
“We should not be incentivising or rewarding the hoarding of cash, particularly at a time when our stock market is teetering on the brink through lack of investment. Britain needs more people investing and more money directed towards growth, and abolishing the cash ISA is a sensible place to start.”
Meanwhile, Tom Selby, director of public policy at investment platform AJ Bell, said that while the chancellor is right to consider ISA reform, it’s important to make the system simpler.
He said: “The chancellor is absolutely right to challenge the status quo on ISAs. Any reforms pursued at the Budget should focus on making it as easy as possible for those with excess cash to invest for the long-term.
“The current fragmented market is overly complex and behaviourally illiterate, driving millions of people who could benefit from long-term investing to stick with cash, leaving them vulnerable to the impact of inflation.
“Simplifying ISAs by combining the cash and investment versions into a single product is the obvious long-term answer, making the system simpler to navigate and removing barriers between saving and investing.”
When could a cash ISA limit be introduced?
As mentioned previously, if a reduction in the cash ISA limit is announced, it will likely be in the Autumn Budget.
The Budget is set to be delivered by Reeves in Parliament on 26 November at around 12:30pm. However, if a reform like this is pushed through, it's highly unlikely it will be implemented immediately.
Instead, the earliest a cash ISA limit is likely to be introduced is the start of the next tax year in April 2026.
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