Chancellor Healey maintains £20,000 cash ISA limit, reversing Reeves' cut

The UK government is set to retain the annual cash ISA allowance at £20,000, abandoning a planned reduction announced by the previous administration.

Chancellor John Healey is expected to confirm the decision in his tax and spending statement to the House of Commons on Wednesday, 28 October. This move reverses a policy introduced by his predecessor, Rachel Reeves, which intended to lower the limit from £20,000 to £12,000 starting in April 2027. The original aim of the cut was to direct more household savings into UK company stocks. The Treasury declined to comment on the reporting, which was first published by the Financial Times.

Healey is expected to argue that educating savers on the benefits of stock and share investment offers better returns than reducing tax breaks on cash holdings. City figures have broadly welcomed the reversal. Banks, which face higher taxes in the current budget, and building societies, which rely on deposits to fund loans, are also likely to benefit from the decision. Industry leaders had previously warned that the proposed cut could discourage saving and increase mortgage rates.

Cash ISAs remain the most popular savings product in the United Kingdom. All ISAs are exempt from tax on interest, as well as from income and capital gains taxes. Jo Harris, chief customer and operations officer at wealth management firm Quilter, stated, "There is a positive in retaining a simple £20,000 allowance that savers understand." She suggested the government could consider an extra investment-only allowance on top of the existing limit, alongside improved financial education.

However, not all market participants view the decision favorably. Michael Healy, chief executive of IG Group's consumer division, criticized the chancellor for missing a chance to boost long-term wealth creation. Healy noted that cash ISA subscriptions increased by £26.1 billion last year, a figure more than four times the growth in stocks and shares ISAs. He described the decision as reinforcing a savings culture that hinders the economy.

According to IG modelling cited by Healy, phasing out cash ISAs for new contributions could generate up to £610 million in additional annual tax revenue by the 2032-33 financial year, without impacting existing savings balances.