Overview
- The UK government is actively reviewing a reduction of the annual tax-free cash ISA allowance from £20,000 to as low as £4,000 to encourage equity investments and support domestic stock markets.
- City minister Emma Reynolds recently met with executives from six major banks and building societies to discuss potential ISA reforms, marking the start of a formal consultation process.
- Banks, building societies, and savers’ groups have warned that the proposed changes could increase tax liabilities for millions, particularly pensioners, and undermine savings behavior.
- Critics argue that lowering the cash ISA limit may not prompt a significant shift to stocks and shares ISAs, with many savers likely opting for taxable accounts instead.
- A consultation paper on ISA reforms is expected in the coming weeks, with no final decisions made yet; any changes would likely take effect no earlier than April 2026.