Overview
- Reports suggest ministers are considering cutting the annual cash ISA allowance from £20,000 to £10,000, with formal proposals still unconfirmed ahead of the 26 November Autumn Budget.
- MoneySavingExpert founder Martin Lewis says a cut would likely fail to raise investing participation, increase tax on savings, and frustrate older savers, and he has proposed a starter investment ISA with a 10% top-up on the first £2,000 instead.
- Building societies and their trade body warn reducing the cash allowance could undermine a trusted savings product and make mortgage funding more expensive, as ISA deposits help finance home loans.
- Rising taxes on interest form the backdrop to the debate, with HMRC expected to collect about £6.1bn this year and AJ Bell data indicating pensioners would shoulder a disproportionate share of any further squeeze.
- Alternatives floated include merging cash and stocks and shares ISAs, creating a British ISA for UK assets, or even deeper cuts to the cash allowance, though multiple advisers caution that restrictions risk eroding saver confidence.