UK Treasury Committee Urges Chancellor To Avoid Cash ISA Allowance Cut

The Treasury Select Committee and various financial experts strongly advise Chancellor Rachel Reeves against cutting the Cash ISA allowance from its current £20,000 annual limit, warning that such a move would unlikely encourage savers to invest more in stocks and shares. They argue that reducing the allowance could create a scarcity mindset, increase friction in transferring funds between Cash and Stocks and Shares ISAs, and negatively impact building societies, which rely on Cash ISA savings for mortgage lending, potentially leading to higher consumer costs. Instead, the committee recommends focusing on simplifying ISAs by combining Cash and Stocks and Shares ISAs and enhancing financial literacy and access to quality advice to help savers make informed investment decisions. Reports suggest Reeves is considering halving the Cash ISA limit to £10,000 to stimulate investment and improve economic growth, but this plan has faced strong opposition from MPs, financial institutions, and consumer groups. The committee emphasizes that improving financial education and advice is a more effective way to foster a culture of investment rather than cutting allowances, which might harm savers and the housing market. Chancellor Reeves has acknowledged the need for a balanced approach and plans to announce any tax changes in the upcoming Budget, keeping the broader financial context in mind.