# Chancellor Plans to Reverse ISA Allowance Cut in Budget, Boosting Savers

> John Healey is set to abandon a proposal that would have lowered the cash ISA limit from £20,000 to £12,000, keeping the full allowance for savers.

- Publisher: Briefzora (https://briefzora.com)
- URL: https://briefzora.com/chancellor-plans-to-reverse-isa-allowance-cut-in-budget-boosting-savers
- Published: 2026-10-28T13:17:07+05:00
- Author: Briefzora Desk (https://briefzora.com/author/briefzora-desk)
- Section: Business
- Topics: Budgets and statements
- Image: https://briefzora.com/uploads/2026/10/chancellor-to-u-turn-on-controversial-isa-raid-in-budget-in-big-boost-blpbaw.webp

## Key points

- Chancellor John Healey is expected to abandon a plan to cut the cash ISA limit from £20,000 to £12,000.
- The reduction was set to start on 6 April 2027 for savers under 65.
- If the U-turn happens, the full £20,000 allowance can still be placed in cash ISAs each year.
- Saving the extra £8,000 annually avoids a 22% tax charge on interest for those aiming for the higher limit.
- Banks and building societies welcomed the reversal, citing reliance on deposits for mortgage lending.

## Why it matters

The decision preserves the full tax-free cash ISA allowance for savers under 65, protecting them from a higher tax bill and supporting deposit-driven mortgage funding.

## Article

**Savers could avoid a cut to their tax-free cash ISA allowance after a major Budget reversal.**

Chancellor John Healey is expected to drop plans to reduce the annual cash ISA limit from £20,000 to £12,000, the Financial Times reports.

The reduction was slated to start on 6 April 2027 for individuals under 65.

It would have lowered the amount they could contribute each tax year by £8,000.

Households aiming to use the £20,000 limit would have faced a 22% tax charge on the interest earned.

People aged 65 and over were to retain the £20,000 cash allowance.

However, the Chancellor is reportedly preparing to scrap the cut in today's highly-anticipated Budget.

His predecessor Rachel Reeves introduced the change to push people toward investing in companies rather than holding cash.

According to reports, Mr Healey believes that removing the savings tax break would not encourage investment.

The proposed £12,000 cap was to apply from April next year, while the overall ISA allowance would stay at £20,000.

If the U-turn proceeds, savers will keep the option of placing the full £20,000 annual allowance into cash ISAs.

This would allow an extra £8,000 to be saved in cash each year compared with the planned lower limit.

Banks and building societies would welcome the move, the FT says.

Building societies depend heavily on depositor funds to finance mortgages.

The Building Societies Association previously warned that tightening this funding could curb lending, especially affecting first-time buyers.

## Frequently asked questions

### When was the ISA cut supposed to take effect?

The cut was due to start on 6 April 2027 for savers under 65.

### What tax rate would have applied to interest if the limit was reduced?

Households would have faced a 22% tax bill on interest if the £20,000 limit was cut.

### Who would have kept the £20,000 cash allowance?

People aged 65 and over were set to retain the £20,000 cash ISA allowance.


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