Budget 2026: Healey reverses Reeves’ cash Isa cut

John Healey has abandoned plans to reduce the cash Isa allowance in his inaugural Budget, discarding the controversial measure introduced by his predecessor. The ceiling on the savings product will stay at £20,000 annually, rather than being reduced to £12,000 from April 2027. The reduction was purportedly designed by former Chancellor Rachel Reeves to stimulate investment in UK companies and encourage more British individuals to invest in the stock market.

However, Healey contended that this approach was misguided in enticing people to invest in shares and stocks. He stated, "I am taking a new approach today to encourage people on ordinary incomes to save and invest, I will not proceed with the cut to the tax-free amount that people can put into a cash ISA. The limit will remain at £20,000 per year, tax-free, for people of all ages."

Healey also pledged to collaborate with the investment sector in developing a new 'Starter Isa' designed to "reward first-time investors." The decision has reignited tensions between brokers and investment platforms, who had been at odds since last year as speculation around the allowance cut escalated. Banks and investment platforms welcomed the reversal, with some believing it would alleviate the impact of a raised levy on banks.

Others argued that the reduced ceiling had failed to motivate people to invest, as many opted to deposit the maximum amount in cash Isas to avoid missing the 2027 deadline. Nonetheless, the lowered ceiling has sparked controversy and criticism from vocal opponents of the cut, including brokers, who had urged Reeves to go further and abolish the limit altogether to foster domestic investment.