Could the Cash ISA allowance be cut in the November Budget?

Chancellor Rachel Reeves is now actively considering reducing the Cash ISA limit from £20,000 to £10,000, according to recent reports by the Financial Times ahead of the 26 November Budget. Her team has confirmed that this option is being explored, although “no decisions have been made”.

This marks a change in tone from earlier in the year, when the government confirmed that the £20,000 ISA allowance would remain in place. While the allowance has not been cut yet, the possibility has moved back into focus.

Last year there was speculation that the limit could fall as low as £5,000. A reduction to £10,000 would be less severe, but would still significantly lower the amount of cash savers can shelter from tax each year.

Why Cash ISAs still matter

Despite ongoing discussion about reform, Cash ISAs continue to offer key advantages:

• Tax-free interest, regardless of rate
  
• Flexible access, depending on the product
  
• Allowance flexibility, as part of the wider £20,000 ISA limit

However, many savers leave money in low-paying ISAs or savings accounts, even though more competitive Cash ISA rates are available.

Saving vs investing: the shift the government wants

The UK has one of the highest household savings ratios in Europe, but much of this sits in current or savings accounts with low returns. Only around 16% of adults hold a Stocks and Shares ISA, despite the potential for higher long-term growth.

This is why the government wants to encourage more people to invest rather than hold excessive cash. Cutting the Cash ISA allowance is one of several options being considered to nudge behaviour towards long-term investment and economic growth.

What this means for savers

For now, nothing has changed. The £20,000 ISA allowance remains fully available.

However, the fact that a cut is officially under consideration means this Budget could signal the future direction of ISA reform.

It’s a good time to review:

• Am I making full use of the current £20,000 allowance?
  
• Is my cash earning a competitive return within a Cash ISA?
  
• Should I balance cash with investments for long-term goals?

The bottom line

The November Budget may not bring immediate changes, but the policy direction is becoming clearer: future governments may shift the ISA system to encourage more investment and less long-term cash holding.

Until any reform is confirmed, the £20,000 allowance remains one of the most generous tax benefits available — and a valuable opportunity to protect your returns from tax.

Make the most of it while you still can.

Make the most of your Cash ISA with Moneyfarm

You don’t need to wait for the Budget to act. With a Moneyfarm Cash ISA, you can take advantage of today’s generous allowance and make your money work harder.

• Earn daily interest
  Watch your savings grow every day from the moment your deposit is received.
• Flexible and accessible
  Withdraw up to three times a year without impacting your rate, and top up anytime, fee-free.
• Secure and protected
  Your cash is held with trusted partners and safeguarded with FSCS protection up to £85,000.
• Free ISA transfers
  Consolidate your savings with no transfer fees, making it simple to manage all your ISAs in one place.