The government is reportedly set to keep the £20,000 annual Cash ISA allowance, reversing plans to reduce the amount savers could place into cash ISAs. The change is expected to be confirmed in the Budget as the Treasury reviews how to encourage more investment.
£12,000 Cash ISA Limit Could Be Dropped
Plans inherited from former Chancellor Rachel Reeves would have reduced the Cash ISA allowance from £20,000 to £12,000. Reports suggest Chancellor John Healey has decided not to proceed with the reduction.
The Treasury has not confirmed the change ahead of the Budget, meaning the final decision remains subject to the Chancellor’s announcement.
Government Wanted More Investment In Stocks And Shares
The proposed reduction was designed to encourage savers to put more money into stocks and shares ISAs rather than keeping savings in cash. Healey is reportedly concerned that cutting the cash allowance would be the wrong way to encourage this shift.
A government source said the Chancellor preferred using a “carrot rather than a stick” to encourage investment.
Savings Groups Welcome The Reported U-Turn
The Building Societies Association has been lobbying the Treasury to keep the £20,000 allowance. Debbie Enever, its head of external affairs, welcomed reports that the proposed reduction could be abandoned.
For savers, retaining the existing allowance would mean they could continue to put up to £20,000 a year into a Cash ISA, subject to the wider ISA rules.
Budget Decision Comes Amid Wider Financial Pressure
The reported change comes as the government prepares a closely watched Budget. Healey has acknowledged that the UK is facing a “difficult moment”, while arguing that the economy is showing signs of resilience.
He has pointed to higher investment, stronger productivity and growth among the fastest in the G7 during the first half of the year.
Opposition Parties Question The Budget Approach
The Conservative Party has criticised the government’s approach, warning about public spending, welfare costs and rising debt. Richard Fuller, the party’s shadow chief secretary to the Treasury, said a cautious Budget would not address the pressures facing public finances.
The Liberal Democrats have also called for more action, arguing that households and businesses are facing higher costs. The final decision on the Cash ISA allowance is expected to come with the Chancellor’s Budget announcement on October 28.
