BUDGET 2025: Cash ISA allowance cut to £12k – but over-65s exempt

The Cash ISA allowance – the amount you can put in a Cash ISA per year – will be reduced to £12,000, down from £20,000, from April 2027.

Speaking at the Budget today, Rachel Reeves said: “From April 2027, I will reform our ISA system, I will retain the £20,000 allowance, designating £8,000 of it exclusively for investment.”

However, she added over-65s will retain the full cash ISA allowance.

Our view

While it’s a noble aim to encourage more people to invest, a cut to the Cash ISA is, in our view, not the right way to do that and spells bad news for savers across the board.

For years, Cash ISAs have offered a reliable refuge for anyone hoping to build an emergency cushion or steadily save toward a personal goal without seeing their hard-earned money eroded by tax.

This move will not only undermine a tool that has supported financial stability for millions, but also risk discouraging the very habit of disciplined saving that households are urged to maintain, especially in uncertain economic times.

Sentiment shows that most regular savers would opt to put their extra cash into a taxable savings account over investing it in the stock market, suggesting that this policy will do more harm than good.

The government should incentivise investing without trying to force people by cutting incentives elsewhere. However, it is good news the government has shielded older people – who can afford to take risk less – from the policy.

However, if you are looking to keep your money shielded from tax and have a savings buffer, you could consider a stocks and shares ISA. Explore our top picks here.

You don’t even need to invest it – some accounts pay tax on cash holdings. We have rounded up the best accounts for uninvested cash here – but make sure to read the terms and conditions first, as some platforms require you to make occasional trades.