Chancellor of the Exchequer Rachel Reeves has confirmed she won’t be cutting the overall £20,000 ISA allowance – a welcome relief for savers and investors.
The government has clearly been listening when it comes to the importance of choice, flexibility and information to support people making the best savings and investment decisions.
That’s because ISAs are the gateway to saving and investing for millions of people, who can get started without having to worry at all about tax.
However, while it was good news for continuity, choice and flexibility for savers and investors, there was no concrete news on what this could mean for the Cash ISA.
With a consultation on the subject due to come out in the coming weeks or months, we take a look at why the Cash ISA is such a popular option.
The importance of the Cash ISA
The Cash ISA is an overwhelmingly popular product and the cornerstone of millions of people’s savings.
So, what’s important now is that through the consultation process, there’s some certainty over the Cash ISA specifically.
Savers need to know they can rely on their allowances, so they can plan effectively.
Investing for the longer term clearly offers enormous benefits, so your money works harder, and your financial freedom is closer at hand. However, savers can’t be forced to invest by removing choice.
HL research shows some people don’t feel confident about investing and don’t feel they understand it well enough to get started.
Making savings less tax efficient won’t automatically encourage these people to invest. It will just hit diligent savers with additional tax as they switch into other kinds of savings accounts.
The step change into investment will come from improving the support we can give people, to help them choose investment.
This is in the pipeline through the planned targeted support regulations – it’s welcome that the chancellor acknowledged the game-changing impact this will have in sharing information and helping people make the most of their money.
It means we’ll be able to share what ‘people like you’ tend to do with their money, and should be able to guide people towards investment if and where that’s right for them.
This article isn’t personal advice. If you're not sure if a course of action is right for you, ask for financial advice. Remember, unlike cash, all investments can rise and fall in value, so you could get back less than you invest. ISA and tax rules can change, and benefits depend on your circumstances.
What should savers and investors do?
Over the next few months, there will be even more debate about the future of the ISA with a consultation still to come.
If you want to make sure you don’t miss out on any changes and what they mean for your money, sign up to our weekly Editor’s Choice email – we’ll send you our top stories from the week every Saturday morning.
And now you know your £20,000 ISA allowance won’t be cut, it could be a good time to take advantage of it with our latest ISA offer.
Open a new HL Stocks and Shares ISA today and enjoy 40% off your account charge.
Open your ISA and add at least £10,000 (including cash and/or transfers) by 30 June 2025.
The 40% discount applies between 1 July and 31 December 2025.
If you're transferring, your reduced charge will start once your transfer completes, and continue until 31 December 2025.
Need more time to apply to transfer? Contact our Helpdesk.
Important – this offer reduces the HL account charge. Our standard account charge is no more than 0.45% a year. Other investment charges may still apply. Buying and selling funds is free. Share and ETF dealing charges apply. See the full ISA offer terms.
(Photo by Hannah McKay - WPA Pool/Getty Images)