Chancellor Rachel Reeves was widely expected to announce plans to reduce the £20,000 tax-free allowance, despite calls from the financial services industry for the allowance to remain in place.
But the BBC has reported that there won’t be any change in the short term, quoting a Treasury spokesperson as saying: “Our ambition is to ensure people’s hard-earned savings are delivering the best returns and driving more investment into the UK economy.”
The Government’s thinking behind lowering the cash allowance was to encourage more investment in stocks and shares ISAs.
But last week saw the Building Societies Association (BSA) warn that mortgage rates could rise if the cash ISA limit was cut.
The Treasury is expected to continue to talk to banks, building societies and investment firms about options for reform.
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Henrietta Grimston, financial planner at Saltus, said: “Reports that the Chancellor is now expected to consult on changes to the cash ISA allowance, rather than introduce immediate reform, will come as a relief to many savers. Clients with large cash ISA holdings aren’t typically chasing high returns, they are prioritising security, flexibility and peace of mind. For many, cash ISAs offer a simple and low-risk way to manage their savings without worrying about market volatility.
“Reducing the allowance would risk penalising these sensible savers, making it harder to build tax-efficient pots for the future. As people approach retirement or other milestones where access to capital becomes critical, any reduction could increase their savings burden, with tax taking a bigger bite out of returns.”
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The cash ISA allowance is safe – at least for now. It’s great that the Government wants to further consult industry – rather than rushing into a change that would be a real blow for savers and may not get more people to invest anyway.
“This decision makes perfect sense, because it should give the Government the chance to see the impact of the other steps it’s taking to boost investment that could really be game-changers for retail investment. Changing the boundary on advice and guidance will be truly transformational. Once companies can offer targeted support to their clients, it will help more people build their understanding and confidence, so they choose to branch out into investment because they know it’s right for them – rather than feeling pushed into it to retain their ISA allowance.”
