Healey reverses planned cut, keeping cash ISA allowance at £20,000 for savers

The U-turn

Savers can continue to pay up to £20,000 a year into cash ISAs after Chancellor John Healey dropped his predecessor's plan to cut that limit to £12,000. The reversal was unveiled in the Budget, so the existing allowance stays where it is. Under the scrapped plan, under-65s would have been limited to £12,000 a year in cash from April 2027. Reeves announced that cut in autumn 2025, and Budget documents tied it to a wider effort to build a retail investment culture. Consumer advocates and industry bodies had criticised the planned reduction before the reversal. The overall allowance of £20,000 applies across both types of account, so the cash limit only affects how much of it can sit in deposits.

How the allowance works

A cash ISA pays interest that is free from income tax. Everyone has an annual ISA allowance, currently £20,000, which can be put into cash or into a stocks and shares ISA, where money is invested in shares, funds or bonds. Growth in an investment ISA is tax-free, but the value can fall, so investors can get back less than they paid in. Since 2014 people have been able to decide how to divide their allowance between the two types. The scrapped plan would have capped cash deposits at £12,000 for under-65s.

Current annual allowance20,000

Scrapped cash limit for under-65s12,000

Current annual allowance

20000 GBP

Scrapped cash limit for under-65s

12000 GBP

Data from the article text

Reaction from the industry

Jason Hollands, managing director of Evelyn Partners, welcomed the reported reversal and argued that cutting the allowance was a blunt way to push people toward investing. He warned that savers could otherwise have faced a bigger tax bill on their hard-earned savings. Andrew Hagger of MoneyComms also welcomed the move, saying it was good news for people who want to keep cash out of HMRC's reach. Hagger argued more broadly that saving should be rewarded.

“Saving should be incentivised by the government to encourage people to build a decent nest egg for their retirement.”

The split between cash and investments remains a personal decision for each saver, with the total allowance unchanged.

When a cash ISA makes sense

Hagger believes current rates make cash especially attractive, and he said locking into a cash ISA for a year or two looks like "a wise move". Some accounts pay interest monthly, which could help savers who want to boost regular income. For people who want to protect their savings, earn tax-free interest and avoid stock market risk, a cash ISA remains a sensible option. It can be especially useful for emergency savings and for a house deposit. Uncertainty in investment markets is the factor savers weigh when deciding between cash and a stocks and shares ISA.