Chancellor Rachel Reeves has confirmed for the first time that reforms to cash Individual Savings Accounts (ISAs) are being considered, raising questions about the future of the current £20,000 annual allowance. Her comments follow mounting speculation and come as new data shows a sharp rise in cash ISA contributions ahead of the potential changes.
Reform “Worthwhile”, Says Reeves
Speaking to the Commons Treasury Committee, Reeves acknowledged that ISA reform is actively under review. While no final decisions have been made, she said, “We want to make sure that we understand people’s needs, but I do think that reform would be worthwhile and that’s what we’re looking at at the moment.”
The Chancellor also stressed that the Government does not want to rush the process, suggesting that although reforms are being explored, their implementation may not be immediate.
Savers React Ahead of Possible Allowance Cut
According to data shared with The Telegraph, more than £3.6 billion was deposited into cash ISAs in February 2025 alone—the highest total in five months. This followed £3.2 billion in January, according to figures from the Bank of England. Experts suggest that speculation about allowance cuts encouraged savers to act before any changes are formalised.
Sarah Coles, head of personal finance at Hargreaves Lansdown, explained: “Undoubtedly this enthusiasm for tax-efficient saving and investing has been partly driven by speculation ahead of the Spring Statement, which encouraged people to take advantage of their allowances while they knew where they stood.”
Proposal Could See Allowance Cut to £4,000
Although no official proposal has been published, reports suggest that one option being considered would reduce the annual cash ISA allowance from £20,000 to £4,000. This would represent an 80% reduction and would bring the limit closer to what it would be if it had merely tracked inflation since ISAs were introduced in 1999.
Laith Khalaf, head of investment analysis at AJ Bell, commented: “It’s the end of the tax year, so inflows are usually quite chunky, but they have probably been supported by rumours the Chancellor is mulling a cut to the cash ISA allowance.”
Building Societies Report Surge in Openings
Some financial institutions have already observed a notable increase in customer activity. Skipton Building Society, for instance, reported a 92% increase in ISA account openings between January and March 2025 compared to the same period the year before.
Caitlyn Eastell, spokesperson for Moneyfacts, said: “Rachel Reeves remains focused on growing the UK economy so ISA reform could still be on the table, but it is crucial that any undue risks that discourage savings are avoided.”
Policy Objective: Shift Towards Investment
The Spring Statement documents hinted at the Government’s broader objective: to encourage retail investment over simple cash saving. The small print reads: “The Government is looking at options for reforms to individual savings accounts that get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment and support the growth mission.”
Currently, there are four types of ISAs: cash ISAs, stocks and shares ISAs, lifetime ISAs, and innovative finance ISAs. The total ISA allowance of £20,000 can be split across these categories.
