By Karim Hammam
UK Chancellor John Healey will use his first budget on Wednesday to scrap plans by his predecessor, Rachel Reeves, to reduce the annual cash ISA allowance from £20,000 to £12,000 starting in April. The Guardian understands Healey favours encouraging investment in shares through education rather than cutting tax breaks on savings.
The reversal has been welcomed by City experts and is likely to please banks and building societies, which rely on ISA deposits to fund loans to households and businesses. Finance bosses had warned the cut could deter saving and push up mortgage rates.
Jo Harris, chief customer and operations officer at wealth manager Quilter, said retaining the simple £20,000 allowance is positive for savers. She suggested the government could consider an additional investment-only allowance on top of the existing limit, alongside better financial education.
Not all in the City agreed. Michael Healy, chief executive of IG Group's consumer division, said Healey missed a golden opportunity to shift money from cash into productive investments. He cited modelling showing phasing out cash ISAs for new contributions could generate up to £610 million in additional annual tax revenue by 2032-33.
Cash ISAs remain the UK's most popular savings product, with all ISAs exempt from tax on interest, income and capital gains. The Treasury declined to comment on the report, which was first published by the Financial Times.
