Healey ‘to scrap planned cut on cash ISA allowance’ in Budget
Chancellor John Healey is expected to scrap the planned reduction in the annual cash ISA allowance, restoring the £20,000 limit for savers. The proposed cap of £12,000 for people under 65 had been intended to encourage more investment, but critics argued it would add complexity and could affect building societies’ mortgage funding.
Industry figures welcomed the reported reversal, while saying other ISA changes may also need review. These included taxing interest on uninvested cash held in stocks and shares ISAs and banning transfers from those accounts to cash ISAs. Quilter’s Jo Harris noted that only 22.7 per cent of ISA subscribers used their full allowance in 2022/23, while 42 per cent saved less than £2,500.
In short
- Healey is expected to retain the £20,000 cash ISA allowance.
- The proposed £12,000 cap had drawn industry criticism.
- Other ISA reforms may also be reconsidered.
Steelman: both sides, in good faith
The strongest fair case each way — we don't pick a winner.
The case for
Keeping the £20,000 cash ISA allowance gives savers a familiar, flexible way to protect savings from tax and avoids adding complexity for people who do not use investment products. Cash ISA deposits can also support building societies’ mortgage lending, so preserving the allowance may help maintain a funding source for borrowers as well as choice for savers.
The case against
Reducing the allowance for under-65s could encourage more money to flow into investments, potentially supporting businesses and giving savers better prospects for long-term growth than holding cash. The fact that most ISA subscribers used only part of their allowance suggests a lower cash limit might affect relatively few people, while retaining the full limit could preserve incentives to keep substantial sums in cash.