Personal finance experts have voiced strong concerns over the proposed reduction of the cash ISA allowance from £20,000 to £10,000, expected to be announced in the upcoming Autumn Budget. Industry specialists warn this move could backfire, undermining both savers and economic growth.
Rob Mansfield, Independent Financial Advisor at Rootes Wealth Management, described the proposal as “nothing more than a tax grab.” He pointed out that many people focus solely on cash ISAs rather than stocks and shares ISAs. With a reduced limit, individuals might simply hold more cash in regular accounts where interest becomes taxable. Mansfield emphasized the importance of educating the public about the benefits of long-term investing instead of pushing savers towards riskier paths for fiscal reasons.
Luke James, Tax Director at Gravitate Accounting, echoed these concerns, explaining that cutting the annual cash ISA allowance after nearly a decade without inflation adjustments could feel punitive to cautious savers and erode trust in fiscal policies. While stocks and shares ISAs offer higher returns, their volatility and complexity may deter many savers who prefer the simplicity and security of cash ISAs. James warned that lowering the allowance might drive savings into taxable accounts, defeating the policy’s goal of encouraging investment.
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He further highlighted that this change would mostly impact higher earners, who already contribute significantly to the economy, and doubted that redirected funds would necessarily support UK businesses. James stressed that without wider incentives, education, and a clear long-term investment framework, the reform risks achieving short-term revenue boosts at the cost of long-term confidence and economic growth.
Andrew Gall, head of savings at the Building Societies Association, expressed his apprehension as well, stating that reducing the cash ISA limit is concerning because it will not encourage more people to invest – a goal everyone supports. He reminded that starting to save is a vital first step towards investing and that cutting the allowance is unlikely to promote this journey.
The consensus among experts is clear: simply cutting the cash ISA limit may hurt savers, undermine trust, and fail to deliver the government’s intended benefits.