Healey to keep cash ISA allowance at £20,000 in first budget

Chancellor John Healey will retain the annual cash Individual Savings Account allowance at £20,000 in his first budget. He plans to announce the decision in his tax and spending statement to the House of Commons on Wednesday. This move reverses a plan by former Chancellor Rachel Reeves to reduce the limit to £12,000 starting in April.

Healey intends to replace the planned cut with a strategy focused on educating savers about equity markets. He aims to encourage higher investment returns through knowledge rather than by reducing tax breaks on savings. City experts have generally welcomed the reversal of the previous administration's decision. The change also addresses concerns that the cut would hinder banks and building societies, which rely on deposits to fund household and business loans.

Finance leaders had previously warned that reducing the allowance could discourage consumer saving and increase mortgage rates. Cash ISAs remain the most popular savings product in the United Kingdom. All ISA types are exempt from taxes on interest, income, and capital gains. The Treasury declined to comment on the report, which was first published by the Financial Times.

Jo Harris, chief customer and operations officer at Quilter, supported keeping the familiar £20,000 limit. She noted that savers understand this structure well. Harris suggested the government could add a separate investment-only allowance on top of the standard limit. She also recommended better financial support to build investor confidence.

Michael Healy, chief executive of IG Group’s consumer division, criticized the decision. He stated that the Chancellor missed a chance to help households build long-term wealth. Healy pointed out that cash ISA subscriptions increased by £26.1 billion last year. This figure was more than four times the growth seen in stocks and shares ISAs. He argued that the move reinforces a savings culture that holds the economy back. Healy added that phasing out new cash ISA contributions could raise up to £610 million in annual tax revenue by 2032 and 2033.