Members of the Commons Treasury committee have expressed concerns regarding potential cuts to the annual cash ISA allowance, which is currently set at £20,000. They warn that such a reduction might not effectively incentivize more savers to invest in stocks and shares, while also possibly increasing mortgage costs for borrowers. During the 2023-24 tax year, a significant 66% of ISA contributions were allocated to cash savings.
Earlier this year, plans proposed by Rachel Reeves to reduce the cash ISA allowance were temporarily paused, but discussions have resumed ahead of the upcoming budget. There is speculation that the allowance could be lowered to £10,000 as a strategy to encourage economic growth.
In a recent committee report grounded in expert testimonies, MPs highlighted the necessity for improved financial education instead of simply limiting cash ISAs. Martin Lewis, the founder of MoneySavingExpert, emphasized that assuming restrictions on cash savings would naturally shift people to stock market investments is misguided. He pointed out that fostering a culture conducive to investing requires substantial changes.
Additionally, leaders from building societies warned that cutting the cash ISA allowance could harm homebuyers. They noted that such savings deposits are critical in funding mortgages, and the reduction could decrease market competitiveness, resulting in higher mortgage rates.
Meg Hillier, the committee chair, conveyed the importance of equipping individuals with the knowledge needed to make informed investment choices. She cautioned that without enhanced financial education, proposed changes aimed at improving the UK’s investment culture might not achieve their goals and could negatively impact both savers and mortgage borrowers.
As the budget presentation scheduled for 26 November approaches, discussions on this matter continue amid broader proposals, including potential increases in income tax and adjustments to tax treatments for certain partnerships. The economic context is underscored by the Office for Budget Responsibility’s downgraded productivity forecasts, anticipated to impose an annual cost of £20 billion on the government.
Source: https://www.theguardian.com/uk-news/2025/oct/25/cutting-cash-isa-limit-will-not-boost-stock-market-mps-warn-rachel-reeves