Cash Individual Savings Accounts under threat
Publication date:
28 March 2025
Last updated:
28 March 2025
Author(s):
Niki Patel, Tax and Trusts Specialist, Technical Connection Ltd
This week, the Chancellor delivered her Spring Statement. Given that Labour pledged to only deliver one Budget per year, the Chancellor's statement was not a formal budget -but instead an update on the economy since her fiscal statement on 30 October 2025. Ms Reeves emphasized that the statement did not contain any further tax increases, but did highlight that work needs to be done to combat tax evasion.
In the lead up to the statement there had been speculation that reforms to Individual Savings Accounts (ISAs) would be placed firmly on the agenda. Rumours circulated suggesting that the Chancellor may consider reducing the £20,000 tax-free annual subscription limit for cash ISAs to £4,000 or potentially scrap cash ISAs all together, in a bid to encourage more investment in stocks and shares to better support economic growth. However, industry experts have argued that such measures would be very unpopular and may not deliver material economic benefits to the UK. A recent Freedom of Information request from A J Bell revealed that tax relief on cash ISAs cost the Treasury an estimated £2.1bn in 2023/24.
While the Chancellor did not announce any specific changes in her speech, hidden in the main Spring Budget document (2.65), with no other supporting material, was a paragraph which stated:
“The government is looking at options for reforms to Individual Savings Accounts that get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment, and support the growth mission.”
This clearly indicates that the government plans to reform ISAs, however, it will be essential that any reforms are approached with caution to ensure the right balance is struck.
By way of reminder there are four types of ISAs available:
- Cash ISAs (including Help to Buy).
- Stocks and shares ISAs.
- Innovative finance ISAs.
- Lifetime ISAs (maximum subscription limit £4,000).
It is possible to subscribe up to £20,000 in one account or split the subscription limit across multiple accounts – although note that an individual can only pay into one Lifetime ISA in a tax year.
To date, cash ISAs have been more popular than stocks and shares, as they are commonly used by those with short-term savings goals, for example, to pay for property deposit or for school/university fees as well as by those who don’t wish to be forced into riskier investments.
However, holding too much wealth in low-yielding cash can hinder longer-term returns. Despite this, cash ISAs still play a vital role in financial planning due to their tax-free status also well as providing both security and accessibility. If reform does take place this could have a significant impact on savers so, it will be crucial to strike the right balance between encouraging investment but also continuing to support those who rely on safer, low-risk options. In the meantime, the annual ISA subscription limit of £20,000 remains for the 2024/25 and 2025/26 tax year.
