Chancellor Rachel Reeves is set to reduce the monthly cash ISA limit from £20,000 to £12,000, marking one of the most significant changes to duty-free savings in recent times.
The advertisement, anticipated in Wednesday’s Budget, is raising concerns among savers who rely on cash ISAs to cover their savings from duty.
The move blends both political urgency and profitable strategy, as Reeves aims to attack a widening £22 billion gap in the public finances while reshaping how people save and invest across the UK.
Why the Cash ISA Allowance Is Being Reduced?
The Treasury wants more households to shift from standard cash ISA savings towards stocks and shares ISAs, which they believe will help strengthen UK markets.
Officials argue that the current system encourages people to keep large sums in low-risk cash accounts, limiting the flow of money into investment products that could support British businesses.
This change comes after a Treasury select committee found that households hold an estimated £360 billion in cash ISAs.
At the same time, contributions to stocks and shares ISAs have fallen, with a 9% drop recorded between the 2021–22 and 2023–24 tax years.
Meanwhile, cash ISA deposits more than doubled, indicating a growing preference for low-risk saving during economic uncertainty.
Dropped Plans for a ‘Brit ISA’
Reeves previously explored a “Brit ISA”, which would have required savers to place at least 20% of their allowance into UK-listed shares.
The idea aimed to boost domestic investment but faced resistance from ISA providers, who said it would overcomplicate the system and deter cautious savers. After significant criticism, the proposal was abandoned.
Other Major Budget Changes Expected
Alongside the new ISA allowance change, Reeves is believed to be considering a cut to the two-child benefit cap and a fresh tax on higher-value homes, a move critics have already labelled the “mansion tax”.
These measures are part of a broader attempt to stabilise the UK’s fiscal position while introducing reforms across welfare and property taxation.
Opposition Parties Criticise the ISA Cut
The Conservatives have wasted no time accusing Reeves of unfairly targeting savers.
Tory shadow chancellor Sir Mel Stride told: “Hardworking savers shouldn’t be facing a tax raid to fund Labour’s addiction to ever more welfare spending.
The Conservatives warned that tax rises were coming after Rachel Reeves lost control of the finances. Slashing the cash ISA allowance would hit millions of responsible people trying to build financial security – especially in uncertain times.
Labour should be backing savers, not making them pay for the Chancellor’s failures.”
How the New ISA Limit Will Affect Everyday Savers?
Still, 000, those who presently make use of the full £20,000 if the ISA allowance is officially reduced to £12,000.
UK Chancellor Rachel Reeves set to slash Cash ISA limit from £20k → £12k (FT)
Goal: Force savers out of 4% cash and into UK stocks & shares to “boost growth” and fund British companies.
Reality check:Most won’t switch — they’ll just pay tax or stop saving the extra £8k
Hits…— AutopilotFxPro (@autopilotfxpro) November 24, 2025
Fiscal counsels anticipate further people to consider diversifying their portfolio between cash ISAs, investment ISAs, and standard savings accounts, depending on threat appetite.
While the Government hopes the shake-up will encourage people to invest more, many households may still prefer the stability of a cash ISA, especially with the rising cost of living and ongoing uncertainty in the economy.
For now, the change signals a major shift in how the UK approaches tax-free savings, and Wednesday’s Budget will confirm just how far Reeves is willing to go to reset the nation’s financial strategy.
