Rumours the chancellor will reduce the cash Isa allowance in next week’s Budget are persisting, with the industry warning it would not be a popular move.
Research from AJ Bell found just 12 per cent of Brits are in favour of a reduction to the £20,000 cash Isa allowance, while 48 per cent oppose the change.
Tom Selby, director of public policy at AJ Bell, said: “With an increase to income tax rates now reportedly off the cards, voters will be wary of the raft of other potential tax-raising measures on the table ahead of the Budget.
“However, the fact a cash Isa cut comes in just as unpopular as a hike in income tax rates may give chancellor Rachel Reeves pause for thought on whether such a move is really a good idea.”
The research also found changes to the limit would be “an ineffective way to promote investing”.
More than half of Brits said if the changes were made they would move their money to a different savings account.
A pre-Budget poll by Flagstone surveyed IFAs on their views on reducing cash Isa allowance and also found most did not believe the changes would encourage more to invest.
Two-thirds of advisers expected clients to move excess cash after reaching a reduced cash Isa threshold to general savings accounts.
Claire Jones, head of strategic relationships and new business at Flagstone, said: “Our research, drawn from some of the finest financial planning and advice minds in the country, lays bare a significant issue with the idea that decreasing the Cash Isa limit will increase appetite among savers to take investment risk.
“The data suggests that this idea is too simplistic and ignores significant macro-environment challenges that make investment less appealing to a large demographic.”
Cash Isas are under threat . . . a futile attempt to push risk-averse savers to invest.
Moneyfacts UK Savings Trends Treasury Report showed cash Isa choice felt its biggest monthly dip since January 2024.
The choice of cash Isas fell to 640 deals from 658, its biggest monthly fall since January 2024, down from the record high in September 2025 (662).
Rachel Springall, finance expert at Moneyfacts, said: “Cash Isas are under threat, with rumours persisting of a cut to the £20,000 yearly allowance, a futile attempt to push risk-averse savers to invest.
“Savers have flocked to cash Isas to shield their money from tax, no doubt boosted by worries over a cut to the yearly allowance, with the Bank of England showing almost £30bn of deposits made since the start of April.
“However, despite the strong start to the new tax year, the choice of cash Isas felt its biggest monthly fall since January 2024, and the average easy access Isa and one-year fixed Isa rates are now at their lowest levels in two years.”
Springall said cutting the allowance would “cause chaos” and give savers less reason to use the products.
tara.o’connor@ft.com
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