Healey restores full cash ISA limit

The UK government introduced savings products to encourage household investment while maintaining tax-free interest. Chancellor John Healey plans to retain the full annual cash ISA allowance in his first budget, reversing a move made by his predecessor.

Rachel Reeves had proposed cutting the annual cash ISA allowance from £20,000 to £12,000 starting in April. The goal was to shift more funds from cash savings into UK company stocks. Healey will announce the decision during a tax and spending statement to the House of Commons on Wednesday. The Treasury declined to comment on the report, which was first published by the Financial Times.

City experts generally welcomed the change. They noted that banks and building societies rely on deposits to fund loans to households and businesses. These institutions also face higher taxes in the current budget. Finance leaders had warned that reducing the allowance might deter consumers from saving and push up mortgage rates. Cash Isas remain the UK’s most popular savings product, with all interest exempt from income and capital gains taxes.

Healey is expected to argue that educating people about the benefits of stock market investment is preferable to reducing tax breaks on savings. Jo Harris, chief customer and operations officer at Quilter, supported keeping the familiar £20,000 limit. She suggested the government could consider an additional investment-only allowance alongside better financial education to build confidence.

Not all industry leaders agreed with the direction. Michael Healy, chief executive of IG Group’s consumer division, described the decision as a missed chance to build long-term wealth. He noted that cash ISA subscriptions grew by £26.1 billion last year, a figure more than four times the increase in stocks and shares Isas. Healy argued that the choice reinforces a savings culture that is holding the economy back.

Healy’s firm modeled the potential financial impact of the previous plan. IG estimates that phasing out cash Isas for new contributions could generate up to £610 million in additional annual tax revenue by the 2032-33 fiscal year. This projection assumes existing savings would remain untouched.