Savers race to use up deposit limits ahead of Chancellor’s changes
Daily Telegraph
03 April 2025
Cash Isas will be reformed to encourage savers to invest their money instead, Rachel Reeves has confirmed for the first time.
Speaking to the Commons’ treasury committee yesterday, the Chancellor said that “reform would be worthwhile” when asked about rumours she is planning to cut the amount people can deposit into cash Isas each year.
It comes as data shared with The Telegraph showed savers were racing to fill up their Isas ahead of the changes.
The timeline for plans to take effect remains unclear, with the Chancellor adding that the Government “did not want to rush it”.
Ms Reeves told the committee: “We want to make sure that we understand people’s needs, but I do think that reform would be worthwhile and that’s what we’re looking at at the moment.”
Previous reports suggested she would cut the annual limit from £20,000 to £4,000 – though existing cash Isa savings are not expected to be affected.
More than £3.6bn was poured into the tax-free savings accounts in February, the highest in five months and up from £3.2bn in January, according to Bank of England data. Savers often put money into accounts at the end of the tax year, which pushes up deposit figures.
More than 80pc of those who already had a cash Isa contributed to their account in the current tax year, research by online investment platform Hargreaves Lansdown found.
The equivalent figure for stocks and shares Isas was just 51pc.
Sarah Coles, of broker Hargreaves Lansdown, said: “Undoubtedly this enthusiasm for tax-efficient saving and investing has been partly driven by speculation ahead of the Spring Statement, which encouraged people to take advantage of their allowances while they knew where they stood.”
Laith Khalaf, head of investment analysis at AJ Bell, said: “It’s the end of the tax year, so inflows are usually quite chunky, but they have probably been supported by rumours the Chancellor is mulling a cut to the cash Isa allowance.”
Lender Skipton Building Society said it had seen a 92pc uplift in Isa account openings from January to March this year compared to the same period last year.
Caitlyn Eastell, spokesman at financial analyst Moneyfacts, said: “Rachel Reeves remains focused on growing the UK economy so Isa reform could still be on the table, but it is crucial that any undue risks that discourage savings are avoided.”
The small print in the Spring Statement document read: “The Government is looking at options for reforms to individual savings accounts 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.”
One proposal popular with City bosses is for the annual cash allowances to be cut from £20,000 to just £4,000 – just a fifth of what it is currently.
There are four main types of Isa: cash, stocks and shares, lifetime Isas, and innovative finance Isas.
Isa limits were originally set at £7,000 when the savings accounts were introduced by Gordon Brown, the former chancellor, in 1999. If the limit had increased with inflation, it would now be £13,165.
But the annual allowance was fixed at £20,000 from the 2017-2018 tax year, with no requirement for savers to put money in stocks and shares instead of cash. Junior Isas (Jisas), have an annual limit of £9,000.
Rates on cash Isas, which are largely determined by market predictions of what the Bank Rate will be in the coming years, have held largely unchanged since the beginning of the year.
The average offering on an easy-access cash Isa was 3.05pc on Jan 1, and was 3.03pc on April 2. On one-year fixed-rate accounts, the average rate has jumped from 4.07pc to 4.11pc in the same time frame, according to Moneyfacts.
The Bank of England held the Bank Rate at 4.5pc in March, after a cut from 4.75pc in February, as inflation figures threatened to rise once more. The cuts came after the Bank held the Bank Rate at 5.25pc for a year between August 2023 and August 2024.
The Treasury was contacted for comment.