Millions of UK savers face a significant reduction in their tax-free savings capacity as the Chancellor prepares to unveil the Autumn Budget this Wednesday.
Budget Proposals and Potential Impact
Chancellor Rachel Reeves will deliver the Autumn Statement in the House of Commons on 26 November, with Treasury officials considering cutting the annual cash ISA allowance from its current level of £20,000. Recent leaks suggest the limit could be reduced to approximately £12,000, marking a substantial decrease for households seeking tax-efficient savings options.
The potential change has sparked considerable debate within financial circles. A report presented to the Treasury Select Committee warned that reducing the cash ISA allowance would not only discourage investment culture in the UK but could also have damaging consequences for the mortgage market.
Industry Concerns and Warnings
Building societies have voiced strong opposition to the proposed changes. Andrew Gall, head of savings at the Building Societies Association representing 43 UK building societies and six credit unions, expressed disappointment that the Chancellor appears to be listening predominantly to investment businesses that would benefit from the changes.
"Building societies depend on cash ISA savings as a critical funding source for their mortgage lending," the Committee report stated. "If this was reduced, it would mean a less competitive market for financial products and consequently higher prices for consumers."
Political and Expert Reactions
Dame Meg Hillier, chair of the Treasury Select Committee, emphasised that "this is not the right time to cut the cash ISA limit." She urged the Treasury to focus instead on providing people with better information and confidence to make informed investment decisions.
Kevin Mountford, co-founder of Raisin UK, highlighted the timing concerns: "At a time when more people than ever are paying tax on their savings interest, restricting access to tax-free cash savings could feel like a step backwards for ordinary households."
However, not all voices oppose the changes. Michael Healy, UK managing director at IG, argued that "the chancellor is absolutely right to take aim at this outdated product" and suggested she should go further by abolishing the cash ISA allowance altogether to encourage more investment in Britain's stock market.
The debate continues as the Chancellor faces competing pressures between encouraging investment culture and protecting traditional savings mechanisms that support critical sectors of the UK economy.
