BUDGET 2025: Cash ISA allowance expected to be reduced to £12,000

The Cash ISA allowance – the amount you can put in a Cash ISA per year – is near-confirmed to be reduced to £12,000, down from £20,000. Chancellor Rachel Reeves is widely expected to confirm the cut in her Budget later today.

The government is hoping that the move will nudge more savers to invest some of their money into stocks and shares ISAs instead of hoarding it all in cash, which could provide a much-needed boost to the UK economy.

Investing has historically also outperformed money held in cash, and the government wants people’s savings to grow faster.

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.

Multiple studies have shown 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, 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.