Martin Lewis: Is the £20,000 cash ISA limit about to be killed off? What savers should be doing now

Watch Martin Lewis' cash ISA limit warning

Here's what MoneySavingExpert.com (MSE) founder Martin Lewis said about the potential changes:

Can't watch the video? Read the full transcript instead

Martin Lewis: "Is the £20,000 cash ISA limit about to be killed off? And if it is and you're a saver, what do you do about it and what should you be doing about it now? I'm Martin Lewis of MoneySavingExpert.com and I want to try and talk you through it.

"Now, the Chancellor, Rachel Reeves, has been evaluating cutting the cash ISA allowance. That's not a rumour. I know it for fact. And it's being talked about in political and policy circles. What we don't know is if anything has been decided and if it has, what has been decided.

"So, as a very basic concept, a cash ISA is just a savings account where the interest is never taxed and you can put in up to £20,000 per tax year – and we’ve just had the start of a new tax year on 6 April. Once the money is in a cash ISA, it stays tax-free year after year.

"Now, the rumour is, what's being considered, is cutting the cash ISA limit from the current £20,000 down to as low as just £4,000. And most people think if there is to be an announcement on it, it would be in the Autumn Budget coming later this year – though nothing is certain."

This is a move to encourage saving in stocks and shares ISAs

"Why are they considering it? Well, currently, you see, you have two types of ISAs. You've got cash ISAs, which are tax-free savings, and stocks and shares ISAs, which are tax-free investing. And they [the Government] believe that if you cut the cash ISA limit more people will invest, and I suspect the Chancellor thinks that that would be better for the economy.

"I'll be honest, I'm sceptical. I see these as different things. They're as different as apples and steak, if you like.

"This one [a cash ISA] is about putting your money away, risk-free and that appeals to some people. This one [a stocks and shares ISA] is about hoping that your investment will grow quicker, but understanding there's a risk that you could lose some money.

"For me, if you want more people to invest, we should be doing a proper national education programme about what investing is and how you do it, and improving people's capability on it; not just cutting the cash ISA limit, which I think, personally, will probably just mean many savers will pay more tax on their savings."

Changes shouldn't impact cash already saved

"Now, all of this is supposition. I doubt any firm decision has been made yet, but it's important to think about what would happen if it did happen as rumoured.

"Now, the first thing to say [is] I've had people get in touch with me panicked about this; [but] it wouldn't impact any money you already have saved in cash ISAs. They're talking about lowering the limit of how much money you could put in in future, so there's no need to panic about your existing cash ISAs if the rumours are correct.

"As for when it starts, well, if it is announced in the Autumn Budget, there's a chance it could start immediately so it would instantly lower your cash ISA allowance. Or there's precedent for ISA changes for them doing the change, announcing it in autumn and starting it in the January or starting it in April 2026 – the new tax year."

Saving into a cash ISA now is likely to be safer

"But for me, what all this means is if you are planning to save into a cash ISA this tax year and you've got the money, getting the money in sooner would seem safer – in case there is a risk of the allowance being cut.

"Now, you might have personal reasons why that doesn't work, or the specific products you want or interest rates you want, well that doesn't work. But as a general rule, I would think, right now, sooner is safer.

"If you want more help on cash ISAs, on how to open one, how they work, how they interrelate with other ISAs, or crucially, all of the best buys, then there's full details on that on MoneySavingExpert.com.

"But I really wanted to get this video out to say, don't panic about your existing cash ISAs, but understand there is a risk the allowance could be lowered later on this year... but nobody knows."