In 2025, big changes might be coming to ISAs (Individual Savings Accounts) in the UK, and many savers are worried. While some reports say the government may cut the annual ISA allowance from £20,000 to just £4,000, others, including banking experts, believe it should be doubled instead.
As the cost of living remains high and people try to make smarter financial choices, the government’s final decision—expected in October’s Autumn Budget—could impact millions of savers.
What Are ISAs and Why Do They Matter?
An ISA is a savings account where you don’t pay tax on the interest or investment gains. It’s a great way for people to save money for the future, whether in cash or through stocks and shares. Right now, you can save up to £20,000 a year in total across different types of ISAs.
This allowance has helped many people save for their life goals, like buying a house, funding education, or just building up savings for the future.
Labour’s Proposal: Slashing the Limit
Reports suggest the Labour party might cut the ISA allowance down to £4,000 a year. Though this wasn’t confirmed during the spring budget, many believe Chancellor Rachel Reeves could make this official in October.
This move has been criticised by many experts and savers who feel it could discourage people from saving. MoneySavingExpert founder Martin Lewis said he’s already heard from people planning to withdraw their ISA savings due to fear and confusion.
Banking Boss Suggests Doubling the Allowance Instead
Danny Haynes, Chief Product Officer at a major UK bank, thinks the government is heading in the wrong direction. Instead of cutting the allowance, he says the government should actually encourage more saving.
He suggests creating separate £20,000 allowances for both cash ISAs and stocks & shares ISAs—allowing savers to invest £40,000 total per year, tax-free.
Haynes explained that over £1 trillion of savings in the UK are earning 2% interest or less, and £250 billion is sitting in accounts earning no interest at all. That means people are actually losing money over time due to inflation.
He calls this “lazy money” and believes that better ISA options could help people grow their savings faster, especially during slow economic times.
Making ISAs Easier to Use
Another problem Haynes points out is how difficult it can be to transfer ISAs to a different provider that offers better interest rates. He thinks the government should make this process easier, which would create more competition among banks and help customers get better deals.
Increasing the allowance, especially for Stocks & Shares ISAs, would also encourage people to invest more and improve financial habits across the UK.
What Should Savers Do Now?
As the government decides what to do next, financial experts are urging people not to panic. Martin Lewis warned that withdrawing money from a cash ISA just because of rumours might be the wrong move.
He added: “We shouldn’t reduce the cash ISA limit. That would send the wrong message to savers.”
For now, it’s best to stay informed, look for better interest rates, and keep track of updates from the government—especially ahead of the Autumn Budget in October.
The ISA allowance debate is heating up in the UK, with some calling for it to be cut to £4,000, while others suggest it should be doubled to encourage saving and investing. With many people worried about rising costs and slow economic growth, the future of ISAs is an important topic. Whether you save in cash or invest in shares, keeping your money working for you—tax-free—can help you build a better financial future. Stay alert for government announcements and consider your options carefully before making any big changes to your savings.
FAQs
What is the current ISA allowance in the UK?
As of now, the ISA allowance in the UK is £20,000 per tax year. This can be split between different types of ISAs, including cash ISAs and stocks & shares ISAs.
Is the UK government planning to reduce the ISA limit?
Reports suggest the Labour party may propose reducing the ISA limit to £4,000, but this has not yet been confirmed. A decision may come in the October 2025 Autumn Budget.
Why are experts against cutting the ISA allowance?
Experts believe cutting the allowance discourages saving and investing, especially at a time when inflation is high and people need better ways to grow their money tax-free.
Can the ISA allowance be increased instead?
Yes, some banking experts have suggested doubling the ISA allowance to encourage more people to save and invest, especially through tax-free accounts like stocks & shares ISAs.
What should I do if I’m worried about ISA changes?
Don’t rush to withdraw your savings. Stay updated with official announcements and consider talking to a financial advisor before making any changes.
