The Treasury is reportedly planning to cut the annual cash ISA limit, despite concerns from savings providers. The changes were expected in Labour’s Spring Statement on 26 March, but now may be announced later this year, according to The i.
The reforms aim to shift savers towards stocks and shares ISAs rather than keeping money in cash. Some economists have even suggested reducing the £20,000 limit to £4,000 to encourage investment in equities.
Chancellor Rachel Reeves has said she wants to boost retail investing, similar to the United States, to improve returns for savers. However, significant changes would require new legislation, making it unlikely the full plan will be revealed before the Autumn Budget.
Since 2017, ISA holders have been able to deposit up to £20,000 annually across cash and investment ISAs. The advantage is that interest, capital gains, and dividends earned within an ISA are tax-free.
With consultations ongoing, the government’s final decision on cash ISA limits remains uncertain. However, any reduction in the allowance would impact millions of savers, making this a key policy to watch in the coming months.