UK Savers Brace: Rachel Reeves Set to Reduce Cash ISA Contribution Limit
Big changes might be coming for UK saversChancellor Rachel Reeves may soon reduce how much we’re allowed to put into a Cash ISA each year. Right now, the tax-free savings limit is £20,000, but this amount could be lowered shortly.
Reeves wants more people to invest their savings instead of just holding cash. She believes this could help grow the UK economy. A lot of people choose Cash ISAs because they offer a secure way to save without paying tax on the interest.. Now, some worry that a lower limit could make saving harder, especially for older people and those who avoid risk.
The complete proposal is likely to be revealed during her Mansion House speech on July 15, 2025.. Until then, we’re all left guessing how big the cut will be and what it could mean for our money.
Why the Cut?
Reeves believes that too much cash is “hoarded” in low‑yield accounts. She wants to build a culture of investing in London’s stock markets. City insiders argue that better returns from equities can boost household wealth and business funding.
Many savers have placed cash ISAs as safe vaults. But with inflation and low interest rates, returns lag. Moving money into stocks and shares ISAs could, in theory, offer growth and support the economy.
What We Know So Far
- The full announcement is scheduled to be made on July 15, 2025.
- The overall £20,000 ISA cap remains. But the cash ISA slice may shrink.
- Rumour is the new cash ISA cap will be about £4,000–£5,000.
- This would mark the first big ISA change since 2017–18.
Supporters and Critics
Supporters say:
- It nudges savers toward better returns in stocks and bonds.
- Investment firms want simpler paths from cash into markets.
Critics warn:
- AJ Bell says this “arbitrary limit… would undermine trust” and won’t truly get people investing.
- Leeds and Nationwide building societies warn it could cut mortgage funding and hurt first‑time buyers.
- Martin Lewis fears ordinary savers will face more tax and little benefit.
- The Spectator calls the move “desperation economics,” predicting it could hurt saving habits and shrink national savings.
Who Will Feel It Most?
- Pensioners and risk‑averse savers rely on cash ISAs. They may struggle with the shift.
- Some may move funds into taxable savings accounts. That could mean paying more tax.
- Banks and building societies could see deposits fall. This could lead to higher mortgage rates and reduced lending activity.
What’s Next?
- The full proposal is set to be unveiled in the Mansion House speech on July 15, 2025.
- Autumn Budget and formal consultation process.
- Treasury to weigh public feedback, especially from savers and charities.
Our Take
We face a tricky balance. On one hand, the idea of channelling funds into stocks and shares ISAs could help grow the economy, and our investments. On the other hand, many savers depend on cash ISAs for safety and stability.
If Reeves cuts the limit too harshly, we risk punishing cautious savers with little overall gain. A smoother, optional path, like hybrid ISAs or better financial advice, could be more fitting.
FAQS:
Right now, we can put up to £20,000 a year into a cash ISA. This falls under the total ISA allowance set for the 2025–26 tax year.
Each tax year runs from April 6 to April 5. The £20,000 allowance can be shared between a Cash ISA, a Stocks and Shares ISA, an Innovative Finance ISA, and a Lifetime ISA. You must be 18 or older. Transfers don’t affect the limit.
No, the ISA limit remains unchanged at £20,000 for the 2025–26 tax year. There’s talk of cutting just the cash ISA part, but no change to the total limit yet.
Disclaimer:
This content is for informational purposes only and not financial advice. Always conduct your research.