Is Rachel Reeves about to slash the cash ISA limit to £10,000? Here’s what it means for your savings and the economy
Chancellor Rachel Reeves. Image Credit: PA Media
The Chancellor, Rachel Reeves, is reportedly considering halving the Cash ISA limit from £20,000 to £10,000 in her upcoming Autumn Budget, in a move designed to steer more savers toward UK stock market investments.
According to reports from the Financial Times, the proposal aims to encourage an “investment culture” in Britain, but it’s already sparking strong opposition from building societies and savers, who warn it could hurt confidence, housing goals, and personal financial security.
A Major Shake-Up to Britain’s Savings Culture
Currently, savers can put up to £20,000 into ISAs tax-free, split across cash and stocks & shares. Under Reeves’ new plan, the total tax-free allowance would remain £20,000, but the cash ISA portion may be capped at £10,000, while the stocks and shares allowance could stay at £20,000.
Treasury insiders say the reform reflects the government’s goal to “get Britain investing again”, citing concerns that too much wealth, over £300 billion, sits idle in low-interest cash ISAs. The change, they argue, could reinvigorate UK markets and support growth amid sluggish economic performance.
Backlash from Building Societies and Savers
The proposal has drawn fierce criticism from the financial sector. Over 50 building societies and finance groups have already urged Reeves not to reduce the limit, calling the cash ISA “a cornerstone of household financial stability.”
Charlotte Harrison of Skipton Group warned that lower ISA inflows could push up funding costs and make mortgages harder to access, threatening the government’s own housing target of 1.5 million new homes. Similarly, Coventry Building Society cautioned that restricting cash savings could “discourage people from building up financial buffers.”
Others argue that encouraging stock investments could expose cautious savers to greater risk, especially those saving for emergencies or short-term needs.
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Supporters Say Reform Could Reignite the Market
Some analysts, however, believe the reform could modernize savings behavior. Tom Selby of AJ Bell said the Chancellor is “right to challenge the status quo” and should consider combining cash and investment ISAs into one simpler product.
Michael Healy went further, branding cash ISAs “outdated” and urging the government to abolish them entirely. Advocates of reform claim the change could increase long-term wealth creation, boost stock market liquidity, and help fund business growth.
Meanwhile, Lucy Rigby, a Treasury minister, noted that investors who consistently chose stocks and shares ISAs over the past two decades would now have over double the returns of cash savers, a key argument behind the policy push.
What It Means for UK Savers
Financial experts advise against panicking or moving funds prematurely. Rachael Griffin of Quilter cautioned that speculation ahead of the Budget should not prompt “hasty decisions,” advising savers to continue using their ISA allowances for tax-free growth.
For those seeking alternatives, analysts recommend short-dated gilts, money market funds, or premium bonds, which can still deliver relatively stable, tax-efficient returns.
The Autumn Budget, expected in November 2025, will reveal whether Reeves proceeds with the cap, a move that could redefine how millions of Britons save and invest for the future.
FAQ
1. What is the proposed change to the Cash ISA limit?
Rachel Reeves is reportedly planning to reduce the Cash ISA limit from £20,000 to £10,000, encouraging savers to shift funds into stocks and shares ISAs to boost investment in UK companies.
2. When will the new Cash ISA limit take effect?
If confirmed, the policy could be introduced in the Autumn Budget 2025 and take effect from April 2026, aligning with the next financial year.
3. Why does Rachel Reeves want to cut the Cash ISA limit?
The Treasury believes too much cash is sitting in low-yield accounts, holding back investment growth. Cutting the limit is meant to “get Britain investing again” and strengthen the domestic stock market.
4. How could this affect UK savers?
Reducing the limit could limit tax-free savings opportunities, especially for cautious savers. However, those investing in stocks and shares ISAs could see higher long-term returns if markets perform well.
5. Will this impact mortgage availability?
Yes, potentially. Building societies warn that lower cash ISA deposits could raise their funding costs, making mortgages more expensive and harder to access, affecting housing affordability.
6. What are the alternatives if the Cash ISA limit is cut?
Experts suggest considering money market funds, short-term gilts, or premium bonds, which still offer relatively stable, tax-efficient returns for those unwilling to invest in riskier assets.
7. How many people have cash ISAs in the UK?
More than 14 million Britons hold over £10,000 each in cash ISAs, highlighting how widespread the potential impact of the policy could be.
8. Are ISAs still tax-free under the new rules?
Yes. The overall £20,000 tax-free allowance remains, meaning savers can still protect their income from tax, but the cash portion may be capped at £10,000.
9. Will the change encourage more investment in UK stocks?
That’s the government’s goal. By limiting cash ISAs, the Treasury hopes to redirect billions into UK-listed companies, driving growth and investor participation.
10. Should savers act before the Budget?
Experts say no. Until official confirmation, savers should continue using existing ISA allowances and avoid making impulsive changes based on speculation.