The future of the cash ISA allowance cut to £12,000 for under-65s is now in doubt, as Prime Minister Andy Burnham and Chancellor John Healey consider reversing the policy inherited from the previous government. A personal finance expert has suggested that the new leadership could scrap the measure in the upcoming Autumn Budget, which would be a significant U-turn on a policy announced under Sir Keir Starmer and Rachel Reeves.
New Leadership, New Fiscal Priorities
Andy Burnham, who has taken over as Prime Minister and Labour Party leader, has inherited a raft of policies from the Starmer government. Among these are the social media ban, pay-per-mile car tax for electric vehicles, and a major shake-up of cash ISAs. The proposed changes, outlined in HM Treasury documentation, would reduce the cash ISA allowance from £20,000 to £12,000 for individuals under 65, effective from April 2027.
However, with John Healey appointed as Chancellor on the first day of Burnham's premiership, there is speculation that the fiscal landscape could shift. Healey, the former Defence Secretary, is set to deliver the Autumn Budget in the House of Commons on October 28, 2026, which will be the first major fiscal statement of the Burnham era.
Expert Casts Doubt on ISA Reforms
Antonia Medlicott, founder and managing director of Investing Insiders, has voiced skepticism about whether the new leadership will follow through on the ISA changes. Medlicott noted that Burnham has said little on ISAs in the past, focusing instead on taxes and social reforms. She explained: "The truth is, Andy Burnham has said precious little on ISAs in the past, with his main focus being on taxes and social reforms. As things currently stand, he'll still be going ahead with the proposed reforms to ISAs next year, but that could change in the Autumn Budget."
Medlicott added: "With a whole new team in Number 10, including a new Chancellor, it's entirely possible that the changes get scrapped, though I wouldn't necessarily make plans based on that assumption. The cash ISA allowance has faced fierce criticism, so may be the kind of measure Burnham might reverse early for relatively little cost and considerable goodwill from the electorate, but hold off on any irreversible decisions until the picture is clearer."
Potential Impact on Savers
If the allowance cut were to proceed, savers under 65 would see their annual cash ISA limit reduced by £8,000, from £20,000 to £12,000. This would affect millions of UK savers who rely on cash ISAs for tax-free interest. The policy was originally designed to encourage investment in stocks and shares ISAs, but it has drawn criticism from consumer groups who argue it penalises cautious savers, particularly older individuals who prefer the security of cash.
Scrapping the cut would be a popular move among voters, as Medlicott points out, potentially boosting Burnham's approval ratings early in his premiership. However, it would also create a revenue shortfall for the Treasury, which had projected increased tax receipts from the reduced allowance. The decision will likely hinge on the broader fiscal strategy of the new government, which faces pressures on public spending and debt.
What Happens Next
The Autumn Budget, due on October 28, 2026, will be the key moment to watch. Healey will have to balance the books while considering the political implications of reversing a flagship policy. Burnham has yet to make any public statement on ISAs, leaving savers in limbo. Financial advisors recommend that individuals hold off on making any drastic changes to their ISA contributions until the Budget announcement clarifies the situation.
In the meantime, the Treasury is expected to release further details on the proposed reforms, but with the new leadership, nothing is set in stone. As Medlicott suggests, the picture will become clearer after the Budget, and savers should prepare for either outcome.
