Brokers and building societies clash over cash ISA cut plans

LEADING brokers and building societies have clashed over whether the Chancellor should proceed with speculated plans to reduce the cash ISA limit.

- SION BARRY Business editor

The London-based trading platform IG is urging Chancellor Rachel Reeves to act on speculation about cutting the cash ISA allowance to £10,000, following analysis suggesting it could deliver a £7.2bn boost for cash ISA holders who opt to invest their surplus funds.

The Treasury is working to promote retail investment to stimulate economic growth, including proposals to introduce a “targeted support” scheme ahead of the 2026 ISA season, alongside rumours of reducing stamp duty on shares to 0.5%.

However, speculation has centred on plans to reform the ISA system, with the cash ISA ceiling, currently set at £20,000, having faced sustained criticism from industry figures who argue it encourages Britons to stockpile cash rather than transfer it into equities.

IG’s research indicates that a third of cash ISA holders - roughly 2.8 million individuals - deposit more than £10,000 annually, while nearly 30% stated they would invest in stocks and shares if the threshold were reduced.

This could generate potential returns exceeding £7bn over a five-year period, equivalent to over £9,100 per saver.

Michael Healy, managing director of IG, said: “The Chancellor is absolutely right to tackle the UK’s overreliance on savings, starting with a product that does nothing for long-term wealth creation.