Reeves Mulls Halving Cash ISA Allowance to £10,000 in Autumn Budget

When Rachel Reeves, Chancellor of the Exchequer stepped onto the Treasury podium this week, she hinted at a move that could reshape the way millions of Britons stash their cash – cutting the annual cash ISA limit from £20,000 to just £10,000.

The proposal is slated to appear in the Autumn Budget 2025Parliament, London, due to be delivered on Wednesday, 26 November 2025 at approximately 12:30 pm UTC. If the numbers stick, the change would take effect from April 2026 – the start of the next tax year – giving savers a year to adjust.

Why the government wants to slash the allowance

At its core, the plan is about nudging money out of low‑interest accounts and into the stock market. The Financial Times reports that ministers argue a healthier investment culture could boost long‑term growth, especially after years of sluggish equity participation compared with the United States.

Reeves has been vocal about the UK lagging behind its peers. In a recent Treasury briefing she said the nation needs “a more positive attitude toward investing” and urged the financial sector to drop the “negativity” that still surrounds equities.

What the numbers look like today

• Current cash ISA allowance: £20,000 per tax year.
• Proposed allowance: £10,000 – a 50% reduction.
• Deposits in April 2025: £12.9 billion (seasonally adjusted), a record high.
• Overall ISA limit (all types): £20,000.
• Personal Savings Allowance for basic‑rate taxpayers: £1,000 of interest tax‑free.

In practice, a saver who maxes out the new cash ISA limit could still funnel the remaining £10,000 into a Stocks and Shares ISA, a Lifetime ISA, or an Innovative Finance ISA – each promising higher returns but also higher risk.

Industry backlash and the road to compromise

Early 2025 saw rumours of an even harsher cut – down to £4,000 – which were promptly crushed by a wall of criticism from banks, building societies and consumer groups. The Moneyfactscompare.co.uk chronicled the uproar, noting that the backlash forced ministers to backtrack on the £4,000 figure.

Later that summer, on 15 July 2025, the press expected a formal announcement capping the allowance at £5,000, only for the Treasury to stay silent. Wealthify.com described the episode as “a case of policy flip‑flopping that left savers bewildered.”

Now, the £10,000 proposal appears to be a middle ground – still a substantial cut, but perhaps palatable enough to avoid a full‑blown revolt.

Voices from the banking sector

Major banks and building societies have warned that the move could have the opposite of its intended effect: making people more wary of investing altogether. In a joint statement, MoneyWeek quoted senior executives who argued that “restricting cash ISA space may push risk‑averse savers into even safer, lower‑yield products, rather than the stock market.”

Meanwhile, the Scotsman ran an editorial calling the cash ISA “a harmful relic” that keeps the public locked into low‑return savings, but it also noted that sudden policy swings could damage confidence in the whole ISA framework.

How the cut could affect different groups

For basic‑rate taxpayers, the Personal Savings Allowance (PSA) still shields the first £1,000 of interest. Higher‑rate earners, however, already see their PSA slashed to £500, and additional‑rate taxpayers get none. Those higher earners often rely on cash ISAs to shelter larger sums of interest, so a reduced cash ISA ceiling could bite hard.

Consider Jane, a 42‑year‑old nurse in Manchester who saves £15,000 a year. Under the current rules she can tuck the full amount into a cash ISA and avoid tax. Cut the limit to £10,000, and she’d need to look elsewhere for the remaining £5,000 – perhaps a Stocks and Shares ISA, where market volatility could threaten her modest nest‑egg.

Expert take: risk, reward, and the bigger picture

Financial‑market analyst Dr. Alan Whitaker of the City University of London told Moneyfactscompare.co.uk that “the UK’s savings rate is among the highest in the G7, but the investment rate lags far behind. A calibrated reduction in cash ISA space could be a lever to shift capital toward productive assets, but the policy must be paired with investor education.”

He added that the timing is crucial: with inflation still above the Bank of England’s target, savers are already feeling the squeeze. Turning them toward equities might boost returns, but the transition could be rocky if confidence erodes.

What’s next? Timeline and expectations

Reeves is expected to formally announce the proposal during the November budget speech. If the Treasury follows its usual process, the amendment will be packaged into a Finance Bill, debated in the Commons and Lords, and finally receive Royal Assent by early 2026.

Should the cut survive parliamentary scrutiny, financial institutions will have until the end of the 2025‑26 tax year to adjust product offerings and inform customers of the new limits. Expect a flurry of marketing material touting “new investment opportunities” and a wave of advisory calls from wealth‑management firms.

Key facts at a glance

• Who: Chancellor Rachel Reeves and the UK Treasury.
• What: Proposed reduction of the cash ISA allowance from £20,000 to £10,000.
• When: Announcement expected 26 Nov 2025; implementation from April 2026.
• Where: Parliament, London (Autumn Budget 2025).
• Why: To nudge savers toward higher‑yield investment vehicles and boost long‑term economic growth.