Martin Lewis on the £20,000 cash rumoured ISA changes

In a new video post, shared on his X account, the Money Saving Expert founder asks: “Is the £20,000 cash ISA limit about to be killed off? And if it is and you’re a saver, what do you do about it?”

He continues: “The chancellor, Rachel Reeves has been evaluating cutting the cash ISA allowance. That’s not a rumour. I know it for a fact, and it’s being talked about in political and policy circles.”

As he explains, a cash ISA is just a savings account where the interest is never taxed, and you can currently put in up to £20,000 per tax year. 

The rumour is that there will be a cash limit from the current £20,000 down to £4000 per year, possibly announced at the autumn budget later this year.

He continues: “You have two types of isas. You’ve got cash ISAs, which are tax free savings and stocks and shares ISAs, which are tax free investing, and they believe that if you cut the cash is a limit more people will invest.

“I suspect the chancellor thinks that that would be better for the economy. I’ll be honest, I’m sceptical. 

“They’re as different as apples and steak. One is about putting your money away, risk free, and that appeals to some people. This one is about hoping that your investment will grow quicker, but understanding there’s a risk that people lose some money.”

But, he’s clear that  no firm decision has been announced, and that it would likely only change the amount savers could add to their pots in future years, not change their current deals.

“So there’s no need to panic about your existing cash,” he says. “But understand there is a risk the allowance could be lowered later on this year.”

These thoughts are echoed by Damien Jordan, founder of Financial Interest and Damien Talks Money, who adds: “While there have been rumours that cash ISAs could be limited this year, and Rachel Reeves has confirmed ISA reforms will be coming, there have been no definitive changes to ISA rules as of yet. 

“Industry figures have been calling for the government to limit cash ISAs to encourage investment in the stock market via Stocks & Shares ISAs instead.”

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​The argument for this change is that it could boost the financial market in the UK, with money that might be saved in cash ISAs instead being moved into circulation through assets like stocks and shares. There’s also the potential for larger long-term returns that could help more Brits build wealth, though they would also be taking on more risk.

Damien adds: “I think this sentiment may be missing the mark. I don’t think that people avoid investing in the markets because they find the cash allowance more alluring. I believe that people don’t invest because they don’t understand it and they see it as risky.

“Cutting the cash allowance would not solve this problem. Instead, we need broader education on the benefits of investing long term to encourage investing.”