Chancellor Rachel Reeves is poised to deliver a significant blow to UK savers and the housing market in tomorrow's Autumn Budget, with plans to drastically reduce the tax-free cash ISA allowance.
What Changes Are Expected?
The announcement, scheduled for Wednesday, November 26, is expected to see the annual allowance slashed from its current level of £20,000. Industry reports suggest it could be cut to £12,000, or potentially as low as £10,000.
This move represents the second budget from the Labour government and has been the subject of intense speculation, with cash ISAs repeatedly identified as a potential target for reform.
Expert Warnings and Sector Backlash
Financial experts are united in their concern, warning that such a cut would represent a major setback for borrowers and the wider property market, potentially leading to higher mortgage rates.
Tim Bowen, CEO at Mutual Vision and former CEO of Penrith Building Society, condemned the proposal. He stated that cutting the cash ISA limit would not just be a backward step for savers but for the "whole building society ecosystem."
"Less money being saved means there will be less to lend, which is bad news for borrowers and the property market as a whole," Bowen explained. He also highlighted the contradiction with the Chancellor's previous Mansion House speech, where she acknowledged the value of mutuals and stated a wish to double the size of the mutual sector.
Broader Consequences for the UK
A recent report presented to the Treasury Select Committee warned Chancellor Reeves that the cut would not only discourage an investment culture in the UK but would have other negative effects.
The report emphasised that building societies depend on cash ISA savings as a critical funding source for their mortgage lending. A reduction in this funding would mean a less competitive market for financial products and, consequently, higher prices for consumers.
Dame Meg Hillier, chair of the Treasury Select Committee, added her voice to the critics, stating, "This is not the right time to cut the cash ISA limit." She urged the Treasury to focus on equipping people with information and confidence to make investment decisions, warning that without this, the Chancellor's attempts to transform the UK’s investment culture would fail, ultimately hitting savers and mortgage borrowers.
Andrew Gall, head of savings at the Building Societies Association (BSA), expressed disappointment, suggesting the chancellor seems "only to be listening to the investment businesses who would benefit from the changes." He argued that starting to save is a crucial first step on the journey to investing, and undermining cash ISAs risks damaging the very investment culture the government claims it wants to build.
Kevin Mountford, co-founder of Raisin UK, summed up the feeling of many, noting that at a time when more people are paying tax on their savings interest, "restricting access to tax-free cash savings could feel like a step backwards for ordinary households."
