Open letter urges Chancellor to maintain Cash ISA allowance

More than 50 building societies, trade associations and other financial firms called on the Government to maintain the current Cash ISA allowance in an open letter to the Chancellor of the Exchequer published on 9 July 2025¹.

The letter followed the Government's statement in its Spring Statement 2025 that it was "looking at options for reforms to ISAs that get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment, and support the growth mission"¹. The signatories argued that restricting Cash ISAs would not encourage people to invest, because it would not "suddenly change their appetite to take on risk", and that a cut to the allowance "could have the knock-on effect of making loans to households and businesses more expensive and harder to come by"¹.

The maximum total an individual can contribute across all their ISAs in a tax year is £20,000¹. Cash ISAs cannot hold investments such as shares or funds, and savers receive the rate of interest offered by their provider¹. With 66% of all ISA subscriptions directed to Cash ISAs in the 2023-24 tax year, they are the most widely used type of ISA, and 14.4 million people hold a Cash ISA and no other type of ISA¹. The total saved in Cash ISAs at the end of 2023-24 was £360 billion, with an average value of £26,900 per Cash ISA¹.

The Treasury Committee, publishing its report on 25 October 2025, set out the arguments on both sides. The Financial Conduct Authority's Financial Lives Survey 2024 found that 61% of adults with savings over £10,000 held all or most of their investible assets in cash savings rather than investments, up from 55% in 2020¹. The Association of Investment Companies argued that limiting contributions to Cash ISAs would "help achieve the Government's dual objectives of supporting financial resilience and growth", and its chief executive, Richard Stone, argued for a reduction in the annual contribution to £5,000 "at the very least"¹. The Investment Association suggested lower limits for Cash ISAs than for Stocks and Shares ISAs¹.

The committee also cited research suggesting only a modest shift would follow a cut. Rathbones Group found "just under one in five (19%) retail investors would invest more in the stock market" as a result of a Cash ISA allowance reduction, while Hampshire Trust Bank found 9% of its survey responders would move to a Stocks and Shares ISA and almost half (48.5%) would contribute to other savings accounts¹.

Why it matters for households

The £20,000 annual ISA allowance is unchanged, and the letter and the committee report concern proposals that have not been implemented. Anyone holding a Cash ISA is affected by the debate only if the allowance is altered, and no change has been announced. The committee's figures show how widely the product is used: 14.4 million people hold a Cash ISA and nothing else, and the average Cash ISA balance was £26,900 at the end of 2023-24¹. Savers who hold cash rather than investments also have the Personal Savings Allowance, an additional tax-free allowance for cash savings outside ISAs¹. The committee noted that a reduction in the Cash ISA allowance would constrain building societies' access to retail savings, which it described as a critical funding source for their mortgage lending¹. Building societies are required to obtain at least 50% of their funding from individual retail member deposits under the Building Societies Act 1986 (Amendment) Act 2024¹.

What happens next

The committee's report was published on 25 October 2025 and the Government has two months to respond¹. The report recommends that the Government should not cut the Cash ISA limit in the hope of persuading people to move to stocks and shares, and that the Treasury should prioritise measures to promote financial inclusion, literacy and awareness and improve access to advice and guidance¹. It also recommends that the Government should not consider the Cash ISA in isolation, suggesting any rationalisation of tax-free cash savings might more sensibly begin by examining the case for the tax-free interest allowance¹. No Government response to the report has been reported.