Budget 26: Chancellor set to cancel cash ISA allowance cut

The proposed reduction was announced by former chancellor Rachel Reeves in her last Autumn Budget in November 2025.

The reported reversal could also see proposed anti-circumvention measures dropped, including restrictions on transfers from stocks and shares ISAs to cash ISAs and a 22% charge on interest earned on cash and cash-like investments held within stocks and shares ISAs.

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Quilter chief customer and operations officer Jo Harris said the proposed cut was unlikely to address the underlying reasons why so many people prefer to hold their savings in cash.

"There is a positive in retaining a simple £20,000 allowance that savers understand. But if the chancellor believes carrot is better than stick, there are other options," she said.

Harris suggested the government could consider an additional investment-only allowance on top of the existing £20,000 ISA limit, alongside improved financial education and support to give people greater confidence to invest.

She also warned that reversing the planned reforms should include removing the associated anti-circumvention rules, arguing that retaining them would leave unnecessary complexity behind.

Reeves' original plans to cut cash ISA allowance a ‘car crash'

AJ Bell director of public policy Tom Selby described Reeves' original reforms as a "car crash", arguing that they would have added complexity with little consumer benefit.

"While the central aim of encouraging more people to invest for the long-term was the right one, the route Healey's predecessor chose to achieve this was painfully convoluted," he said.

Selby said the chancellor now had an opportunity to deliver on Labour's pre-election pledge to radically simplify the ISA landscape.

AJ Bell has long advocated for a single main ‘One ISA' product combining cash and investments, allowing savers to move seamlessly from short-term saving to long-term investing.

The firm estimates that around three million people in the UK hold £20,000 or more in cash ISAs but have no money invested in stocks and shares ISAs. If half of that money were invested for the long term, AJ Bell believes it could unlock an additional £30bn of investment.

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Broadstone senior financial planner Winston Ruddick also welcomed the reported decision, saying protecting the £20,000 allowance would preserve savers' ability to build tax-free savings without taking on additional investment risk.

"While encouraging more people to invest is a sensible ambition that could boost long-term returns and channel more capital into UK equities, restricting access to tax-efficient cash savings was always a blunt instrument to achieve this," he said.

Ruddick added that cash ISAs remained a simple and accessible product, particularly for those with shorter-term savings goals or a lower appetite for risk.

"The government is right to focus on improving financial education and building confidence in investing, helping people make informed decisions about their financial futures."

Not welcoming the reports, IG Consumer CEO Michael Healy said that 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," he said.

Healy said that the Budget should be 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," he added.

Healey's Autumn Budget speech is later today.