JOHN HEALEY KEEPS CASH ISA ALLOWANCE AT £20,000

Chancellor John Healey said in his Budget speech that the annual cash Isa allowance would remain at £20,000 for savers of all ages. “I will not go ahead with the cut to the tax-free amount that people can put into a cash ISA,” he said. Former chancellor Rachel Reeves had announced plans to reduce the limit to £12,000 for savers under 65. The change was due to take effect on 6 April 2027. Savers aged 65 and over would have retained the £20,000 limit under Reeves’s plan.

Reeves had presented the proposed cut as a way to encourage more people to invest in stocks and shares. Isas allow savers to receive interest, investment income and capital gains free of tax. HMRC figures released in September recorded about £135.7 billion in subscriptions to adult Isas in the 2024–25 tax year, an annual increase of £32.7 billion. According to HMRC, cash Isa subscriptions accounted for £26.1 billion of that increase. The department recorded a 37.5% rise in cash Isa subscriptions from the previous tax year.

HMRC also recorded a £6.1 billion annual increase in stocks and shares Isa subscriptions, equivalent to 19.7%. Its figures put the increase in Lifetime Isa subscriptions at £472 million, or 20.1%. Retail banks and building societies use savings deposits to fund lending, giving the cash Isa limit significance for those institutions as well as savers. Banks had widely expected the Budget to include higher taxes on their sector.