Chancellor John Healey is set to abandon plans to cut Cash ISA limits to £12,000 a year, a move that has been criticised as "deeply misguided" by the CEO of IG Consumer.
The rule change, announced by former Chancellor Rachel Reeves, was intended to encourage investment in stocks and shares rather than holding savings in tax-free cash. It was due to come into force in April 2027.
Policy reversal
After former Prime Minister Sir Keir Starmer stood down, Reeves was removed from her role. However, replacement John Healey will not go ahead with her policy, it has been reported, with less than six months to go until its planned implementation.
The rules would have meant that from next April, savers would only be able to deposit £12,000 into Cash ISAs, down from the existing £20,000. Any extra money saved outside of ISAs would have been subject to tax.
Background and criticism
Cash ISAs, which allow savers to put money away and shield it from tax each financial year, have been the subject of scrutiny. At one point, rumours suggested the limit could be set as low as £10,000.
Reeves had set out reforms to the ISA system, including online hubs designed "to help people invest" in the UK.
According to reports in the Financial Times, Healey believes the allowance cut was the wrong tool to persuade Britons to invest more in stocks and shares and would rather look to educate savers on the benefits of equity investing.
Michael Healy, CEO of IG Consumer, said: "The Chancellor has squandered a golden opportunity to help British households build long-term wealth and get more money flowing into the businesses that drive our economy. At a time when Britain desperately needs growth, protecting tax incentives that encourage people to sit on cash rather than invest is a deeply misguided decision."
Impact and next steps
Healy added: "Cash ISA subscriptions surged by £26.1 billion last year, more than four times the increase in Stocks & Shares ISAs, yet the Chancellor has chosen to reinforce the very savings culture that is holding Britain back. Worse still, IG modelling suggests 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."
He concluded: "This Budget should have been about making Britain's money work harder for its people and its economy instead of defending a tax break that most savers don't need. The Chancellor should have gone further by phasing out Cash ISAs for new contributions and redirecting those incentives towards helping households invest, build financial security and share in Britain's future growth."
