Healey to keep cash Isa limit at £20,000 in first budget

John Healey is set to use his first budget to preserve the annual cash Individual Savings Account allowance at £20,000. The chancellor will overturn a decision made by his predecessor, Rachel Reeves, which aimed to cut the limit to £12,000 starting in April. This move is intended to encourage more money to flow into UK company stocks.

City experts have welcomed the reversal. Banks and building societies are also expected to benefit from the decision. These institutions rely on customer deposits to fund loans for households and businesses. They currently face higher taxes in the budget, making the retention of the higher allowance a favorable development for the sector.

Healey is expected to address the House of Commons on Wednesday with his tax and spending statement. He plans to argue that educating people about the advantages of investing in shares is a better strategy than reducing tax breaks on savings. He believes this approach will help generate higher investment returns for individuals.

Leaders in the finance industry had warned that the proposed cut could deter consumers from saving. They also expressed concern that the change might push up mortgage rates. Cash Isas remain the most popular savings product in the UK. All Isas are exempt from tax on interest, income, and capital gains.

Jo Harris, the chief customer and operations officer at Quilter, supported the decision to keep the simple £20,000 allowance. She noted that savers understand this figure well. Harris suggested that if the chancellor prefers a carrot over a stick, the government could consider adding an investment-only allowance on top of the existing limit. She also recommended better financial education to give people the confidence to invest.

Michael Healy, chief executive of IG Group’s consumer division, disagreed with the approach. He stated that the chancellor missed a chance to help British households build long-term wealth. Healy pointed out that cash Isa subscriptions increased by £26.1bn last year. This rise was more than four times the increase seen in stocks and shares Isas. He argued that the decision reinforces a savings culture that is holding the economy back.

Healy added that IG modelling suggests phasing out cash Isas for new contributions could generate up to £610m in additional annual tax revenue by 2032-33. This revenue could be raised without touching existing savings. The Treasury declined to comment on the news, which was first reported by the Financial Times.