Potential ISA reforms on the way - 13th March 2025

Chancellor Rachel Reeves is considering reforms to Individual Savings Accounts (ISAs), particularly focusing on cash ISAs. While no changes are expected in the upcoming Spring Statement, discussions are ongoing.

Potential Reforms Under Consideration

• There is a proposed reduction to cash ISA deposits from £20,000 per tax year to £4,000.

• Consolidation of ISA Products; there are suggestions to merge cash ISAs and stocks and shares ISAs into a single account to simplify the system and promote investment in the stock market. 

Implications for Savers and Markets

• Reducing the cash ISA allowance could affect individuals who use ISAs for cash savings, potentially leading them to seek alternative tax-efficient savings vehicles. 

• The idea is that this will encourage more investments into stocks and shares ISAs - increasing liquidity and activity in the UK stock market, potentially boosting the valuations of domestic companies. However, there does not appear to be a proposal of a restriction to invest in UK listed companies only.

Critics argue that such reforms might disadvantage risk-averse savers and complicate the savings landscape. Financial experts emphasise the need for a balanced approach that considers both the desire to stimulate economic growth through increased investment and the importance of preserving secure savings options for individuals. 

As discussions continue, significant fiscal decisions regarding ISAs are anticipated in the full autumn Budget.