Budget 2026: Healey reverses Reeves’ cash Isa cut
John Healey has scrapped plans to slash the cash Isa allowance in his maiden Budget, ending the controversial measure introduced by his predecessor.
Healey has confirmed the ceiling on the savings product will remain unchanged at £20,000 instead of being cut to £12,000 from April 2027.
The cutting of the allowance was designed by former chancellor Rachel Reeves to funnel cash into UK companies and get more Brits to invest in the stock market.
But Healey argued this was the wrong approach to persuade people to invest more in stocks and shares.
He said: “I am taking a new approach today to encourage people on ordinary incomes to save and to invest, I will not go ahead with the cut to the tax-free amount that people can put into a cash ISA. The limit will stay at £20,000 per year, tax-free, for people of all ages.”
He also promised to work with the investment sector to create a new ‘Starter Isa’ aimed to “reward first-time investors”.
Isas are exempt from tax on interest, capital gains and income, and are the UK’s most popular savings product.
City clash
The decision has reignited the feud between brokers and investment platforms, who first butted heads last year as speculation surrounding a slash gathered speed.
Banks and investment platforms have welcomed the reversal, with some believing it will soften the blow of a hiked levy on banks. Others argued the cut had failed to move people into stocks, as Brits instead chose to allocate the maximum to cash Isa in order to beat the 2027 deadline.
But the lowered ceiling has caused uproar with vocal critics of the cut, including brokers, who previously urged Reeves to go further and abolish the limit altogether to encourage domestic investment.
Reeves’ cut
Reeves’ slashed the ceiling last year in a major policy shakeup, but cut was slightly higher than the £10,000 cap initially floated, as she attempted to appease bodies who were in support of cash Isas.
Over 65s were the only cohort allowed to retain the full ceiling, a move industry figures hailed as “smart”, by granting them a cash cushion to protect them during retirement.