What to do about cuts to cash ISA limit in Budget

Rachel Reeves is set to cut the cash ISA limit in today's Budget, with the cap poised to drop from £20,000 to £12,000.

- KARL MATCHETT BUSINESS AND MONEY EDITOR

The proposed move, seen as a bid to encourage investing, has prompted a mixed reaction from consumers and businesses. Many savers will not feel the impact of a cut on a day-to-day (or year-to-year, more specifically) limit, bearing in mind the difficulty many people have in saving upwards of £1,000 per month. But they could still be hit when they come into a lump sum - through inheritance, for example, or a property sale.

Either way, some people clearly want to move money before limits are cut. One cash ISA provider, Plum, told The Independent they'd seen a 49 per cent spike in the amount deposited into accounts between 15 October and 15 November.

So what are the next possible moves for your cash, what are the rules around the different options and - the question the chancellor wants people to answer “yes” to - should you be starting to invest?

ISA limits and rules

First things first, the full ISA limit of £20,000 is not being reduced. It's just the cash ISA limit, which is (apparently) coming down.

Similar to how you can put a maximum of £4,000 into a lifetime ISA and still put another £16,000 elsewhere, you will still be able to utilise the additional £8,000 of your annual allowance in different tax-free products.

So, for example, if you had the full amount to use, you might opt to save £12,000 in a cash ISA, £4,000 in a lifetime version and the remaining £4,000 in a stocks and shares investing ISA.

Saving is still an option