Safeguard your financial savings as Rachel Reeves slashes Cash ISA allowance
A recent poll shows most people are not happy about with the Chancellor’s announcement to cut the Cash ISA
Alex Sitaras, head of savings and partnership products at Skipton Building Society, has offered his expert advice for savers grappling with Rachel Reeves’ proposal to cut the annual tax-free Cash ISA allowance from £20,000 to £12,000 for those under 65. A quick survey of 563 Cash ISA holders conducted by the building society revealed a negative reaction from 67% to the Chancellor’s announcement.
Three-quarters believe the Government should be encouraging people to save, not limiting them. While 73% said the move reduces the benefit of having a Cash ISA altogether, and 53% feel it is unfair on those who have planned their finances around the existing £20,000 cap.
Just over half (53%) of those surveyed by OnePoll expect they will max out the new £12,000 allowance once introduced in 2027. A further 23% already regularly max out the £20,000 cap, while another 27% said they’ve managed it once or twice.
Alex’s first piece of advice for savers is to consider diversifying across ISA types as they can still maximise the overall annual ISA limit, which remains unchanged at £20,000, by splitting it across both Cash ISAs and Stocks & Shares ISAs. He explained that this approach helps diversify risk whilst keeping as much money shielded from tax as possible.
Secondly, he urged savers to move quickly and maximise this year’s £20,000 allowance before any alterations take effect. Meanwhile, he says savers shouldn’t forget about the Personal Savings Allowance, where basic-rate taxpayers can earn up to £1,000 in interest tax-free annually.
With a 4% interest rate, a basic-rate taxpayer can stash away £25,000 before facing any tax liability, though this allowance decreases for higher-rate taxpayers.
He suggested some savers might consider Premium Bonds as well, which allow you to hold up to £50,000 tax-free through monthly prize draws – although they operate differently from conventional interest-bearing accounts since returns depend on chance rather than guaranteed interest.
For those with children, he noted that exploring intergenerational wealth transfer through Junior ISAs presents another avenue. Savers can contribute an extra £9,000 per child annually tax-free, though this money legally belongs to the child and becomes accessible at 18.
The specialist from Skipton Building Society, which offers complimentary financial guidance through its My Money Reviews service, warned: “Slashing the cap so sharply means many more people under 65 will end up paying tax on savings that were previously protected, so making the right moves now is vital.
“Stocks and Shares ISAs can be a brilliant way to grow wealth tax-efficiently, but only when they genuinely support someone’s long-term goals. These changes are a useful nudge for savers to start thinking about investing, yet they won’t – and shouldn’t – drive decisions on their own.
“What matters most is choosing the right approach for your circumstances, whether that’s cash, investments, or a blend of both.”
Almost half (44%) predict they will need to reassess their savings habits as a consequence of the budget announcement, with 26% expecting they’ll transfer more money into investments instead. And 20% believe they’ll contribute more to workplace pensions which could be a more tax-efficient alternative.
In addition, more than half (52%) believe it will be crucial to obtain financial advice to help them navigate the changes, with 41% likely to seek guidance to find the best way to maximise returns.
Four in 10 would do so to prevent errors that could eat into their savings, and 30% want help understanding what the reduced allowance means for their long-term goals.
Alex added: “Today’s announcement has understandably rattled a lot of Cash ISA savers, particularly those under 65. People who’ve worked hard to build a financial buffer are suddenly unsure what the changes mean for them, and whether they need to rethink their entire savings strategy.
“What we’re hearing already is a mix of frustration, confusion and, for some, real concern about making the wrong move. But there are still plenty of smart, tax-efficient options available – the key is understanding which ones genuinely fit your goals.
“Whenever allowances change, it can feel like the rules of the game have shifted overnight. That’s why taking a moment to step back, reassess, and get clear on the basics can make a huge difference.
“The good news is no one has to figure this out alone – we offer expert, regulated financial advice tailored to people’s needs – and it’s available to everyone, not just our members.”
