Healey retains £20,000 cash ISA limit in first budget

Savers in the United Kingdom will keep their full £20,000 annual limit for cash Individual Savings Accounts under the new government's first fiscal plan. Chancellor John Healey is set to announce on Wednesday that he is dropping a proposal to lower this cap to £12,000. This decision leaves the most popular savings product in the country unchanged, allowing households to continue sheltering their cash from income and capital gains taxes without a reduced ceiling.

The policy shift reverses a move initiated by predecessor Rachel Reeves. Reeves had planned to slash the allowance to steer more money into UK company stocks starting in April. Healey’s team believes a different approach yields better results. Instead of penalizing cash holders, the Treasury prefers to persuade investors to move funds into shares. Healey will tell the House of Commons that educating the public on investment benefits offers higher returns than trimming tax breaks on savings.

The reversal was first reported by the Financial Times and has been met with mixed reactions from industry leaders. Bank executives and building societies have welcomed the change. These institutions rely on deposits to fund loans, and leaders had warned that the cut could discourage saving and push up mortgage rates. Banks also face higher taxes in the upcoming budget, making the ISA decision a relief for the sector.

Jo Harris, chief customer and operations officer at Quilter, supported the decision. She stated that retaining a simple £20,000 allowance is positive because savers understand it. Harris suggested that if the government wants to encourage investing, it should add an investment-only allowance on top of the existing limit. She also called for better financial education to build confidence in the market.

Not all financial figures agree with the direction. Michael Healy, chief executive of IG Group's consumer division, called the decision a wasted chance. He argued that the Chancellor missed a golden opportunity to help households build long-term wealth. Healy noted that cash ISA subscriptions increased by £26.1bn last year. This figure was more than four times the rise in stocks and shares ISAs, according to IG data.

Healy contended that the move reinforces a savings culture that holds Britain back. He cited IG modelling which suggests that phasing out cash ISAs for new contributions could generate up to £610m in additional annual tax revenue by 2032-33. This potential revenue would be generated without affecting existing savings accounts.

The Treasury declined to comment on the news. Healey is scheduled to deliver his tax and spending statement to the House of Commons on Wednesday. The announcement will finalize the treatment of cash ISAs for the coming year.