Why are Cash ISAs in the headlines?
Cash ISAs have been in the news recently, following speculation that the Government is reviewing ISA tax allowances for future years. This move is reportedly an attempt to encourage a shift from predominantly cash saving towards more investing in the UK.
Publications like the Financial Times and the BBC have since reported on Friday 11th July, that the Chancellor intends to announce plans to consult with industry leaders on the best approach to achieve their goal in her Mansion House speech on 15th July 2025.
While there’s nothing confirming that Cash ISA limits are definitely changing, this news might understandably cause some concern for those who use Cash ISAs to build their savings with tax-free interest. So, we’re here to explain what these potential changes could mean, offer our perspective, and ensure you’re kept fully informed as this develops.
Balancing saving and investing – why does this matter?
Investment firms have suggested that the Government should consider restricting the Cash ISA allowance in order to promote more of a culture of investing. This is based on an assumption that by reducing Cash ISA allowances it will nudge consumers to invest to maximise their tax-free gains.
However, many financial institutions – including Moneybox – have been campaigning for alternative solutions such as better education and guidance to support getting consumers into investing.
Investing could be a good choice for those looking to grow their money and build wealth for the future by maximising long term potential returns (5+ years). Cash ISAs remain an important tool for anyone looking to build emergency savings and achieve any short-to medium-term financial goals.
What do we think? Our Head of Personal Finance, Brian Byrnes brings you our take
- Before being elected, this Labour government committed to reviewing and potentially simplifying the ISA landscape, so this comes as no surprise.
- It’s also clear that the Government and Treasury, via the ongoing Advice Guidance Boundary Review (AGBR), want to encourage more people to realise the benefits of investing where appropriate. Moneybox supports this ambition and are committed to advocating for consumer needs to be kept at the heart of solutions/policies throughout.
- We believe that to drive a culture shift towards investing in the UK – the Government and the industry needs to consider measures that will boost engagement among consumers earlier in life and help build financial confidence to alleviate some of the barriers to investing that currently exist.
- Cash ISAs play a vital role in supporting financial resilience and providing a stepping stone to investing. As such we do not believe that cutting the Cash ISA limit will be effective in making people feel more confident to invest.
- Moneybox have regularly engaged with the Government and Treasury on saving and investing policy in recent years. We are pleased that the Government has taken a step back and is looking to consult with consumers and the industry first, before making any significant changes to ISAs. We will continue to proactively engage with the Government and advocate for our customers on all aspects of financial policy.
Why Cash ISAs are important
Cash ISAs have been available in the UK for 25 years and used by 18 million people across the UK, with accounts holding around £300 billion in assets. It’s a great way to build up your savings tax-free with an annual £20,000 allowance – shared across any ISA account – and all interest earned is completely tax-free!
Source: Government Official Statistics, 04/12/2024.
What happens next?
It’s very important to remember that all of this is speculation at the moment. It is expected that the Government will lay out their plans on the 15th July and open a consultation leading towards the Autumn Budget. At this point, any changes and associated timelines will be confirmed.
In the meantime, we’ve taken proactive steps to engage the Government, including working alongside colleagues from across the personal finance industry to sign an open letter urging the Chancellor to maintain the current £20,000 tax-free Cash ISA savings allowance.
We’ll be working closely with the Government to campaign for what’s best interest of our customers and will provide an update after the announcement on the 15th July.
Any money you have already saved within your Cash ISA will be safe and protected. If you have the means to do so, now could be a good time to top up your Cash ISA and make the most of your £20,000 tax-free ISA allowance.
ISA and tax rules apply.