- Chancellor Rachel Reeves is remaining tight lipped on ISA reform, but reiterates aim to get more people investing, as set out in the Spring Statement
- In an interview with the BBC’s Newscast, Reeves confirmed the £20,000 ISA allowance will remain…
- … although that doesn’t necessarily close the door to cutting the Cash ISA allowance, while retaining the overall £20,000 limit
- AJ Bell believes a lower Cash ISA allowance will not achieve the government’s objective of shifting Cash ISA money into UK equities and instead will only introduce complexity and cut tax advantages for cash savers
- Instead, AJ Bell advocates simplifying the ISA landscape to boost retail investing and support UK plc in the process
Rachel Vahey, head of public policy at AJ Bell, comments:
“Reeves and the Treasury are still wrestling with what ISA reform will look like in practice. It’s good news she has committed to keeping the overall ISA limit of £20,000 – ISAs are one of the most popular ways for Brits to save and invest for their future and cutting that limit would have hit many people hard.
“But this commitment doesn’t necessarily mean the idea of a lower allowance for only Cash ISAs is off the table. The Treasury will be looking at a range of solutions in their quest to get a better balance between cash and equities in ISAs.
“A lower limit for just Cash ISAs, though, is likely to be a lose-lose for everyone. It will fail to encourage the behaviour outcome the Treasury is looking for. Instead, AJ Bell research shows only one in five Cash ISA holders would migrate to investing in the UK stock market if the Cash ISA allowance was reduced or abolished, with the majority (51%) saying they would simply stick the money in a taxable savings account and a further 24% indicating they would opt for National Savings & Investments (NS&I) products such as Premium Bonds*.
“Furthermore, a different Cash ISA limit would introduce more complexity into an already complex ISA landscape, potentially cutting off transfers between Stocks and Shares and Cash products.
“Instead, a more straightforward route to improving ISAs for retail investors that would support people switching from cash to long-term investing is within reach. Simplifying the current ISA framework by merging Cash and Stocks and Shares ISAs to create a single main ISA product would remove much of the friction of the current framework, meaning Brits can change their ISA investment profile simply and easily, dialing up their investment exposure as their life evolves and their saving horizon and life goals change.
“Simplification, together with the introduction of targeted support – provider-led guidance to help people make these tough decisions – could truly provide the foundation for the retail investing revolution Reeves desires.”
*Based on a nationally representative sample of 1,792 Cash ISA holders, conducted by Opinium on behalf of AJ Bell in March 2025.
