Chancellor Rachel Reeves is facing significant warnings over a proposed change to Cash ISA rules that experts say could have 'big consequences' for UK savers. The Labour Chancellor is expected to announce a reduction in the annual tax-free allowance for Cash ISAs from the current £20,000 to £10,000.
Financial Experts Voice Serious Concerns
Derence Lee, chief finance officer at financial institution Shepherds Friendly, has issued a stark warning ahead of the Autumn Budget scheduled for November 26. "Cash ISAs have long been an extremely useful tool for many people to save money effectively, and one of the core reasons is the annual £20,000 tax-free allowance," Mr Lee stated.
He emphasised that the reduction "would deal a huge blow to the millions of people across the UK who rely on Cash ISAs for building their savings, particularly during this period of economic uncertainty." The ability to save tax-free helps people build emergency funds and plan for major life expenses without taxation eroding their savings.
Potential Impact on Savers and Lenders
Mr Lee further cautioned that "cutting the allowance so drastically could potentially discourage saving," pointing to Bank of England data revealing that over £49.8 billion was deposited into Cash ISAs in 2024, demonstrating the accounts' popularity.
Financial journalist Martin Lewis offered a blunt assessment, stating: "My view is that if you cut the Cash ISA limit it will simply pee off millions of older people." He doubted it would encourage investment, suggesting it would simply mean "they pay more tax on savings."
Lewis also highlighted potential consequences for the housing market, noting it "will also cause a problem for building societies in order that they use savings to lend cash to raise mortgages. So it could be a real issue for lending on mortgages."
Uncertainty Surrounds Final Decision
Despite the strong reactions, Lewis emphasised that "we do not know whether this will definitely happen," adding that the initial reports originated from the Financial Times. The final decision will be revealed when Chancellor Rachel Reeves presents her Autumn Budget later this month.
