Is the Cash ISA Limit Being Cut? What Savers and Homeowners Need to Know in 2025

July 5, 2025

Selection of newspaper front pages showing Rachel Reeves appearing emotional in the House of Commons amid speculation about cutting the Cash ISA limit

By Samuel Mather-Holgate

As rumours swirl about the UK Government potentially cutting the annual Cash ISA allowance from £20,000 to just £10,000, savers across the country are rightly concerned. With interest rates still elevated and the cost of living squeezing household budgets, tax-free savings remain a vital tool — not just for investors, but for would-be homeowners and everyday savers.

But what would such a cut mean in real terms? And what other options do you have if the Government does press ahead with this proposal?

What’s Happening with the Cash ISA Limit?

The current Cash ISA limit sits at £20,000 per year, allowing UK residents to earn interest free from income tax. It’s long been a favourite for both cautious savers and those preparing for large purchases like a mortgage deposit.

But there is increasing speculation — including from The Daily Express — that the Chancellor, Rachel Reeves, is considering slashing this to just £10,000.

As I recently told the Express:

“if you don’t need your cash in the next five years, you should really be investing your money rather than keeping it in cash.”
— Read the full quote in The Daily Express

Why This Matters for More Than Just Savers

While a lower Cash ISA limit clearly affects traditional savers, the implications stretch further:

First-time buyers often use Cash ISAs to build their deposits
Pensioners rely on ISAs for accessible, low-risk savings
Homeowners holding emergency funds for interest rate rises
Investors who prefer fixed-rate savings during volatile markets

With inflation still at 3.4% as of June 2025 and global pressures (like the Israel-Iran conflict) keeping energy costs high, many households are parking their money in high-interest Cash ISAs for safety.

Cutting the allowance could force more people to explore alternative vehicles — many of which come with greater complexity or risk.

What Other Types of ISAs Are Available?

While Cash ISAs are the most familiar, there are four other types of ISA — each with its own rules and benefits:

1. Stocks & Shares ISAs

Invest in equities, bonds, or funds with tax-free growth and income. Riskier than Cash ISAs but offer long-term growth potential.

2. Innovative Finance ISAs (IFISAs)

Allow you to lend money via peer-to-peer platforms. Higher potential returns — but also higher risks and limited FSCS protection.

3. Lifetime ISAs (LISAs)

For those aged 18–39, you can save up to £4,000 annually and receive a 25% government bonus for buying your first home or saving for retirement.
➡️ Lifetime ISA info – GOV.UK

4. Junior ISAs (JISAs)

Allow parents or guardians to save for their child’s future tax-free. Up to £9,000 per year.

Alternatives Outside the ISA System

If the ISA limit is slashed, savers may need to diversify beyond tax-free accounts. Here are a few other options to consider:

• Premium Bonds (NS&I)

Your capital is secure and you could win tax-free prizes instead of interest.
➡️ Learn more at NS&I

• Fixed-term Savings Accounts

Often offer higher rates than ISAs — but the interest is taxable and your money is locked in.

• Pension Contributions

Still one of the most tax-efficient ways to save. Contributions reduce your taxable income and grow tax-free until retirement.
➡️ Pensions explained – Pensions Advisory Service

• General Investment Accounts (GIAs)

No contribution limits — but gains may be subject to capital gains and dividend tax. Still useful once your ISA limit is reached.

What Should Savers Do Now?

Until any official policy is announced, the £20,000 allowance still stands — so now may be a smart time to make the most of it.

If you’re:

Sitting on savings in a low-interest account
Building a house deposit
Nearing retirement and want accessible tax-free funds

… then a Cash ISA is still a solid option. But you might also benefit from combining it with other products, like a LISA or Stocks & Shares ISA, depending on your goals and time frame.

‍ Final Thoughts from a Financial Adviser

Whether or not the ISA limit is cut, the bigger question remains:
Are you using the right mix of accounts to save and invest tax-efficiently?

ISA rules have changed frequently in recent years — and they may change again. The best way to stay ahead is to get personal, regulated advice that aligns with your savings goals, risk tolerance and tax position.

At Mather & Murray Financial, we help clients: