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last mo.

Treasury Weighs Cash ISA Cut as LISA Penalties Surge and Fiscal Case Builds

Fresh data alongside independent analysis depict a scheme with rising penalties that also delivers a net fiscal gain, sharpening choices before the Autumn Budget.

Taxes on higher profits for housebuilders and mortgage lenders are thought to help make the Lifetime Isa a money-maker for the Treasury
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The tax advantages of ISAs can sometimes far outweigh the headline interest rates on savings accounts (Photo: Eugene Mymrin/Getty)

Overview

  • Financial Times reporting says the Treasury is considering halving the £20,000 cash ISA allowance to £10,000 to steer saving toward equities, with decisions still unannounced.
  • Martin Lewis and other consumer voices argue a lower cash ISA limit would punish savers and is unlikely to boost stock investing, with possible effects on building society mortgage lending.
  • HMRC records show 1.34 million Lifetime ISAs were open by end‑2023/24, with 99,700 penalised withdrawals that year generating £75.3m in charges and 56,900 first‑home purchases.
  • CBI Economics and Moneybox estimate the LISA returns about £1.45 in tax receipts for every £1 of cost and has provided a net £1bn boost since 2021/22, with abolition projected to cost roughly £3bn by 2041.
  • Industry figures and affected savers call for reforms such as lifting the frozen £450,000 property cap and redesigning the withdrawal charge so users keep their own investment growth, with forecasts showing more areas breaching the cap by 2027.