UK Chancellor Rachel Reeves has confirmed that the government will not reduce the £20,000 annual tax-free savings allowance on Individual Savings Accounts (ISAs), a decision that brings temporary clarity to ongoing discussions around the broader ISA reform agenda.
Pressure had been mounting from across the financial sector and concerned savers alike, with institutions warning against hasty changes to a system relied upon by millions.
According to GB News, the proposed cut—initially rumored to be as steep as £4,000—sparked concerns about access and fairness. The Chancellor’s statement leaves the structure intact for now, but signals that adjustments may still be considered.
Original Plan to Encourage Retail Investment Now Under Review
Initial suggestions that the ISA threshold could fall as low as £4,000 emerged in February, when Reeves proposed a shift toward retail investing as a way to improve long-term savings returns for UK households. The Treasury subsequently stated that ISA reform was “under review” ahead of the Autumn Budget.
The Chancellor told the BBC:
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.
She added:
At the moment, 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. But I absolutely want to preserve that £20,000 tax-free investment that people can make every year.
Strong Language From City Minister Reveals Deeper Reform Ambitions
The government’s ambition to promote investment in equities was echoed earlier this year by Emma Reynolds, City Minister, who told a House of Lords committee:
Why have we got hundreds of billions of pounds in cash ISAs? We have failed to drive an investment culture.
Her comments helped to frame the broader motivation behind the proposed overhaul, which the government hoped would incentivize more risk-aware participation in UK equity markets.
Major Banks United in Opposition to ISA Cut
Following these statements, Reynolds met with senior executives from NatWest, Lloyds, HSBC, Barclays, Nationwide, and TSB—a meeting hosted by the banking lobby group UK Finance. Industry leaders warned that reducing the cash ISA limit would “restrict consumers’ options” without effectively encouraging equity investments.
Stuart Haire, Chief Executive of Skipton Building Society, summarized this view:
We agree with the Government that people in the UK should increase, if they have the wherewithal and the risk appetite, the amount of money they have got in equities. However, changing the cash ISA limit will not do that, so therefore it’s the wrong tool to achieve the policy outcome.
Investment Industry Calls for Targeted Incentives
The reversal was welcomed by financial professionals, including Jason Hollands, Managing Director of Bestinvest, who said:
It seems the Chancellor has bowed to effective lobbying by banks and building societies on this matter following on from a strong backlash from the press.
He suggested that rather than cutting ISA allowances, the government should consider a package of reforms to support equity investment.
To get more people investing in equities requires a combination of better education, an appropriate regulatory environment so they can get the help they need in choosing a suitable investment, and the potential carrot of additional incentives – he said.
Hollands proposed scrapping stamp duty on UK share purchases within ISAs and introducing a modest income tax credit for contributions to Stocks & Shares ISAs.
ISA Popularity Remains Strong Among Savers
Cash ISAs continue to be widely used across the UK. According to the latest data, 18 million individuals hold cash ISAs, with total contributions reaching £49.8 billion in 2023, marking a 6% increase from the previous year.
While the government has decided against reducing the annual limit, changes to how ISAs operate may still be implemented in the coming months. These adjustments are expected to prioritize equity investment pathways while maintaining flexibility for those who prefer cash-based savings.
The full scope of reforms will likely be unveiled before the Autumn Budget, as the Treasury looks to balance the objectives of domestic capital market growth with consumer protection and choice.
