In a move that has left the UK scrambling, Chancellor Rachel Reeves is reportedly considering a drastic reduction in the annual cash ISA allowance from £20,000 to a mere £4,000. While the government's aim is to encourage investment in the stock market, the proposal has sparked outrage among those who claim that the government is attempting to change public interest from long-term to short-term saving.
According to a survey by Nottingham Building Society, 41% of savers aged 25-34 believe the cut would hinder their ability to buy a home, and 34% say it would affect their retirement plans by means of eating into their non-taxable income.
Despite the government's intentions, the proposal has faced significant opposition. The Building Societies Association and consumer advocates like Martin Lewis have launched campaigns urging the government to reconsider. The ‘money saving expert’ advises that “It wouldn’t impact money already in cash ISAs, it would just cut what you can put in, in future. Whether it'd start immediately, or in January or April 2026, no one knows (including at this point, I suspect, Rachel Reeves). Yet if you plan to save in a cash ISA, all of this would suggest getting it in sooner would seem safer.”
In response to the rumours, savers have already begun to act. In March 2025, UK savers deposited £4.2 billion into cash ISAs, a 31% increase from the previous year as they prepare to face the prospect of HMRC having access to more of their taxable income.
While the proposed change is not set in stone, the proposal has ignited a debate about the balance between encouraging investment and protecting savers' interests. As the situation develops, it remains to be seen whether the government will proceed with the cut and annoy the country’s long-term savers - or will they heed the public's concerns?
Niall Nadeem, M&S Accountancy and Taxation Ltd
