John Healey is expected to keep the annual starter ISA cash limit at £20,000 when he sets out his first budget on Wednesday. That would reverse plans to cut the allowance to £12,000 from April.
He is expected to tell the House of Commons that it is better to educate people about the advantages of investing in stocks and shares than to reduce tax breaks on savings. Cash Isas are the UK’s most popular savings product, and all Isas are exempt from tax on interest, income and capital gains.
Jo Harris on £20,000
Jo Harris, chief customer and operations officer at Quilter, said there is a clear advantage in keeping a simple limit that savers already understand. “There is a positive in retaining a simple £20,000 allowance that savers understand.”
She also said the government could add a separate investment-only allowance on top of the £20,000 Isa limit, alongside better financial education and support to give people the confidence to invest. That would keep the existing cash Isa structure in place while creating a distinct route for money meant for shares and other investments.
Rachel Reeves and the cut
Rachel Reeves had planned to reduce the annual cash Isa allowance from £20,000 to £12,000 a year from April. The Treasury declined to comment on the news when it was reported, and the Financial Times first reported the change in direction.
The original plan was aimed at getting more money flowing into UK company stocks. Banks and building societies were said to favor keeping the allowance because they rely on deposits to fund loans, so the choice now sits between steering new money toward investments or preserving the savings route that many customers already use.
Michael Healy’s figures
Michael Healy, chief executive of IG Group’s consumer division, said the chancellor had missed a chance to help households build long-term wealth. “The chancellor has squandered a golden opportunity to help British households build long-term wealth and get more money flowing into the businesses that drive our economy.”
He also said cash Isa subscriptions surged by £26.1bn last year, more than four times the increase in stocks and shares Isas, and argued that keeping the current structure reinforces the savings pattern he wants to change. His modelling suggests phasing out cash Isas for new contributions could generate up to £610m in additional annual tax revenue by 2032-33, without touching existing savings.
The decision now points to a narrower change than the earlier plan suggested: keep the cash Isa allowance at £20,000, and leave any investment-only addition to the next stage of the policy debate.
