Rachel Reeves is expected to launch a formal review of the ISA market within weeks, according to reports. The Treasury is preparing to open a consultation that will invite views from across the City of London on how ISAs might be reformed.
The move comes as the Government looks for ways to encourage more savers to invest in stocks and shares ISAs, rather than holding large sums in cash ISAs.
Hints of a potential overhaul to cash ISAs first emerged in the Treasury’s Spring Statement, where the Government stated its intention to “get the balance right between cash and equities to earn better returns for savers” and to “boost the culture of retail investment.”
Among the suggested reforms is a possible reduction of the current £20,000 annual allowance for ISAs — which is currently shared between cash and stocks and shares ISAs. In recent months, speculation has pointed to a possible new limit of £4,000 for cash ISAs.
According to a report from the Financial Times, Chancellor Reeves could use her Mansion House speech in July to formally launch the consultation.
ISA Popularity and Potential Changes
ISAs have become hugely popular, with over 22 million account holders across the UK. Cash ISAs remain the most commonly held type, alongside stocks and shares ISAs, Lifetime ISAs, and the Innovative Finance ISA.
Currently, savers hold approximately £300 billion in cash ISAs. Of that, around £100 billion is held by individuals who have £20,000 or more saved in cash ISAs, according to analysis from stockbroker AJ Bell, based on HMRC data.
Amid recent market uncertainty — triggered in part by US President Donald Trump’s global tariff policies and rising speculation over ISA changes ahead of the Spring Budget — savers poured over £4 billion into cash ISAs in March alone.
Industry Reactions and Political Pressure
Back in January, several City firms urged the Chancellor to reduce the tax advantages associated with cash ISAs, arguing that funds placed into cash would offer better returns if instead directed into stocks and shares ISAs.
However, the idea of cutting the cash ISA limit has faced pushback. Building society leaders have warned that such a move could reduce access to mortgage funding, potentially leading to higher loan rates for borrowers.
Despite months of speculation, no changes to the ISA allowance were announced in the Spring Statement. But with the upcoming consultation, the ISA system could be facing its biggest overhaul since the scheme was introduced in 1999.
Any reforms resulting from the consultation process are expected to be considered for Rachel Reeves’s next Autumn Budget.
A Treasury spokesperson said: “No decisions have been taken.”
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