There are rumours circulating about a potential future changes to Cash Individual Savings Accounts (ISA) limits.
Will the ISA Limit be Reduced?
There are rumours that the government make changes to ISAs, possibly to be announced by Chancellor Rachel Reeves in the Autumn Budget later this year. For now, there are no changes and our annual ISA contribution limit remains at £20,000.
£726 billion is currently held in UK ISAs, with £294 billion of this being in cash.
Industry figures have been urging the treasury to limit ISAs to investments only. The interest on savings in ISAs is currently free from tax. Fidelity International for example has proposed merging Cash ISAs and Stocks and Shares ISAs to be merged into a single ISA, and also capping the Cash ISA element to £4,000.
Lord John Lee of Trafford, the first ISA millionaire, whose tax-free holdings reached £1 million in 2003, told the Financial Times that he believes the Cash ISA allowance should be halved. He also stated that Stocks and Shares ISAs should be limited to UK-listed companies. If more money was to be diverted into Stocks and Shares ISAs by cutting the Cash ISA limit, especially if these Stocks and Shares ISAs were limited to UK companies, this could have a positive impact on the economy.
However, Some Disagree with Potential Changes…
Carol Knight, CEO of The Investment and Saving Allowance (TISA) commented:
“Whilst we welcome steps to encourage investing, hasty changes to tax breaks on Cash ISAs will penalise savers, who deposited a record £49.8 billion in 2024.
Our research found that it is disengagement and a lack of understanding which are the key barriers to savers investing. We found that over 70% of people who have not invested in S&S ISAs, have never considered doing so, and people overestimate the risk of losing money from investing.
With that knowledge, it is likely that any restriction on the annual allowance available to Cash ISA savers will result in either money being saved in other products which may have lower interest rates, savers breaching the Personal Savings Allowance limit or money not being saved at all. It appears very unlikely that it will simply increase the amounts being invested. Cash products remain an important component of building financial resilience, especially for those new to saving and those in later life.”
Research from Nottingham Building Society found:
- 41% of 25-34 year olds with Cash ISAs say a cut in the allowance would impact their ability to put down a home deposit
- 55% of savers oppose the possible cut to the Cash ISA allowance
- 76% of those over age 55 oppose the possible cut to the Cash ISA allowance
Tom Rile, director of retail products at Nationwide, stated:
“Cash Isas not only help ordinary people save efficiently but enable us to fund our first-time buyer lending.”
“Any limitations on lending would further impact those looking to get a foot on the housing ladder at a time when saving for a deposit remains a significant challenge.”
Current Tax Year Almost Over
If you want to take advantage of the current tax year’s ISA allowance, you need to make any payments into your ISAs before midnight on Saturday 5th April. Any unused allowance for the 2024/5 tax year will be lost as it does not get carried over year-to-year.
The current annual ISA allowance is £20,000, and this can be split across different types of ISA, be it cash ISAs, Lifetime ISAs, Help to Buy ISAs, Stocks and Shares ISAs, and so on and so forth. The £20,000 allowance is the total amount you can pay in, not the limit per ISA account.
If you aren’t quite sure what to do with your money and feel that you would benefit from some support and impartial advice, get in contact with a registered and qualified financial adviser.