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Martin Lewis has given his verdict about cutting the cash ISA allowance as reports suggest the Chancellor could announce big changes to the tax-free savings account as part of her Budget. An ISA is a special type of savings account where any interest you earn is tax-free. You can currently save £20,000 every tax year across any ISA accounts you may have. However, a new report by the Financial Times suggests Rachel Reeves is considering halving the amount you can save into a cash ISA to £10,000. The Chancellor is said to be considering this to try and get more people investing in the stock market instead. But in a post published earlier this month on X, Martin Lewis said he believed cutting the cash ISA limit "isn't the solution" to encouraging investing. He said: "A cash ISA cut would simply piss millions of, often older, people off and I doubt will change the dial on investing. It'd just mean more tax paid on savings, and be a problem for building societies raising cash for mortgages. "If they were saying they were doing it to raise revenue, at least that would be logical. What is needed is for them to encourage investment, better education, and better incentives." It is important to remember that at the moment, no changes have been announced by the Treasury. If any updates to the cash ISA are confirmed, this will form part of the Budget on November 26. Martin Lewis previously urged savers to "keep going" as normal. Rumours of the cash ISA being cut first started circulating earlier this year, and it one point it was reported that the limit could be cut to as low as £4,000. The Treasury Committee last week also urged the Government not to cut the cash ISA limit, warning it would unlikely encourage people to switch to investing. Instead, it recommended improving financial literacy and enhancing access to advice and guidance, so people can make informed decisions with their savings. The main types of ISAs are cash ISAs, stocks and shares ISAs, Lifetime ISAs, and innovative finance ISAs. Children have their own version called Junior ISAs. The latest data shows that in 2023/24, the nation paid into 9.9 million cash ISA accounts. More than 14 million people in the UK are thought to have more than £10,000 saved in cash. In response to the Treasury Committee report, Rachel Reeves said: “We want to help people to be able to save for mortgages, but we want people to get better returns on the money they’re investing, to put money in an ISA or indeed in a pension means that you’re sacrificing spending today to save for the future.”
