Chancellor Healey set to U-turn on cash ISA cut in Budget boost for savers

Chancellor John Healey is expected to reverse the planned cut to the cash ISA allowance in today’s Budget, according to the Financial Times. The Sun reported that the move is a huge boost for savers who had feared a slash in their tax-free cash limits ^[1].

The current annual limit of £20,000 was due to be reduced to £12,000 from April 2027 for those under 65, a policy announced by former Chancellor Rachel Reeves. The Mirror confirmed that Healey is set to scrap this plan, meaning the allowance will remain unchanged ^[2].

The original reforms aimed to encourage younger savers to move funds into the stock market rather than holding cash. However, the policy faced criticism from industry experts who argued it created unnecessary complexity. Tom Selby, director of public policy at AJ Bell, described the previous government’s approach as “painfully convoluted” and noted it likely had the opposite effect of its stated aim ^[2].

Selby told the Independent that Healey deserves credit for “seeing this iceberg coming” and taking action before the reforms took effect. He labelled the initial ISA reforms a “car crash” that added complexity without consumer benefit ^[3].

While the cash ISA limit cut appears set to be abandoned, questions remain about other measures introduced by Reeves. These include a proposed ban on transferring money from stocks and shares ISAs to cash ISAs and a tax on uninvested cash within investing ISAs. Selby assumed these “awful measures” designed to prevent circumvention of the cut would also be scrapped ^[3].

Not all voices supported the reversal. Michael Healy, CEO of IG Consumer, called the U-turn a “deeply misguided decision.” He argued that the Budget should have focused on making Britain’s money work harder for the economy rather than defending a tax break most savers do not need ^[3].

Jo Harris, chief customer officer at Quilter, suggested the original cut would have had little impact, as only 22.7 per cent of ISA subscribers used their full allowance in 2022/23. She urged the chancellor to consider additional investment allowances or better financial education instead of restrictive policies ^[3].

The decision comes as the government faces pressure to ease cost-of-living concerns. The reversal avoids a scenario where savers felt forced to rush deposits before the new rules took effect, a dynamic critics warned would have flooded cash accounts in the short term ^[2].