Chancellor Healey Expected to Reverse Cash ISA Cut
New government reportedly plans to restore £20,000 annual deposit limit, abandoning previous reforms.
Sarah Connor
New Chancellor John Healey is expected to reverse a planned cut to cash ISA deposits.
Mr. Healey will reverse the decision in his inaugural Budget. He believes the allowance cut was the wrong tool to persuade Britons to invest more in stocks and shares, preferring to educate savers on the benefits of equity investing.
Retail savings banks and building societies welcome the anticipated U-turn. Industry voices claimed the cut would have actively hampered building societies, which utilize those deposits to back domestic mortgages.
The retail investing industry, however, split on the original move. It imposed added rules and costs on their processes. Savers can allocate their allowance into cash, stocks and shares, or a combination of both, with ISAs exempt from tax on interest, capital gains, and income taxes.
Given the prime minister’s main focus is on easing cost-of-living pressures, we shouldn’t be surprised the cash ISA cut is set to be unceremoniously ditched.
Tom Selby stated, "Given the prime minister’s main focus is on easing cost-of-living pressures, we shouldn’t be surprised the cash ISA cut is set to be unceremoniously ditched."
Stocks and shares ISA subscriptions saw a 19.7% (£6.1 billion) annual increase in the tax year 2024-25.
Jo Harris claimed the proposed cut was always likely to do very little to tackle the problem of too much long-term money sitting in cash. Harris also stated that policy inevitably changes, but announcing complex reforms and asking firms to prepare for them only to reverse course before they take effect is the worst kind of policymaking.
Maike Currie warned that restricting cash ISAs risked penalizing the very people who need the most help building long-term wealth, particularly women. Scant detail remains around the incoming first-time buyer ISA, intended to replace the lifetime ISA.
Harris suggested the government could consider an additional investment-only allowance on top of the £20,000 ISA limit, alongside better financial education and support to give people the confidence to invest. She also claimed the chancellor should finish the job and ditch the anti-circumvention rules around the cash ISA limit cut.
Michael Healy, however, claimed the chancellor has chosen to reinforce the very savings culture that is holding Britain back. He stated this Budget should have been about making Britain's money work harder for its people and its economy instead of defending a tax break that most savers do not need.