Healey set to reverse cut to cash ISA allowance in Budget
Chancellor John Healey is reported to be scrapping the planned reduction of the cash ISA allowance from £20,000 to £12,000, a move the City has largely welcomed as protection for savers.
Chancellor John Healey is reported to be preparing to reverse a planned cut to the cash ISA allowance, keeping the annual limit at £20,000 rather than reducing it to £12,000. The move, expected to feature in his first Budget, has been broadly welcomed in the City, where commentators say the original plan would have penalised households that rely on low-risk savings.
Winston Ruddick, senior financial planner at the financial services consultancy Broadstone, described protecting the £20,000 allowance as welcome news for savers. He said reversing the cut would help people build tax-free savings without taking on the extra risk of investing in the stock market. While he acknowledged that encouraging more people to invest is a sensible ambition that could boost long-term returns and channel capital into UK equities, he argued that restricting access to tax-efficient cash savings was always a blunt instrument for achieving that goal.
Ruddick stressed the role cash ISAs play in personal finance. He said they are a simple, accessible and widely understood product, often serving as a first step towards longer-term saving habits and financial security. He added that they are particularly useful for people with shorter-term goals or a lower appetite for risk, and play a vital role in financial planning more generally.
Not all commentary has been supportive of the existing approach. Ruddick criticised the Chancellor for squandering what he called a golden opportunity to help households build long-term wealth and to direct more money into the businesses that drive the economy. He argued that Britain desperately needs growth at this moment, and that protecting tax incentives which encourage people to sit on cash rather than invest was a deeply misguided decision.
He pointed to figures showing cash ISA subscriptions rose by £26.1 billion last year, more than four times the increase in Stocks and Shares ISAs. In his view, the Chancellor had chosen to reinforce the savings culture that he believes is holding Britain back.
Ruddick also cited modelling by IG suggesting that phasing out cash ISAs for new contributions could generate up to £610 million in additional annual tax revenue by 2032-33, without touching existing savings. Reports ahead of the Budget indicated that the Chancellor himself believed the allowance cut was the wrong tool for persuading Britons to invest more in stocks and shares. The Budget is expected to set out the Government's final position on the measure.
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