Speculation is mounting that the Chancellor Rachel Reeves may reduce the cash ISA allowance in the upcoming Spring Budget.
New research from the Nottingham Building Society is breaking down how cutting this tax-free allowance, which currently sits at £20,000, will impact Britons.
The study, conducted among 2,000 cash ISA holders, shows many fear such a move would harm their ability to save for home deposits and retirement.
This research highlights that a fifth (20 per cent) of savers believe a reduced cash ISA allowance would impact their ability to save for a house deposit.
Furthermore, the number rises dramatically to 41 per cent among 25-34 year-olds, precisely the demographic struggling most to get onto the property ladder.
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Reeves is rumoured to be considering changes to the ISA allowance
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One in three savers (34 per cent) fear their retirement savings would be affected.
A further 36 per cent worry about their ability to build an emergency fund.
First-time buyers face mounting challenges in today’s housing market, according to additional research from the building society.
There has been a marked increase in first-time buyers needing financial support to secure mortgages over the past year.
A third (31 per cent) of mortgage brokers report a rise in multi-generational purchasers pooling resources to fund deposits.
Analysts claim that any reduction in cash ISA allowances would further compound difficulties for those navigating the property market at a time when aspiring homeowners need more support, not less.
The research also reveals little evidence that reducing cash ISA allowances would redirect savings into investments. Only 38 per cent of savers say they would consider investing more in a Stocks and Shares ISA instead.
As well as this, one in three cash ISA holders—an estimated 2.5 million people—indicate they would simply save less overall.
This suggests the policy could backfire, reducing national savings rates rather than stimulating investment elsewhere.
The findings unearth a clear public preference for government policies that encourage personal saving.
More than half of savers (55 per cent) oppose the reported cut to the cash ISA allowance. This opposition rises dramatically to three in four (76 per cent) among over-55s.
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Harriet Guevara, the chief savings officer at Nottingham Building Society, has issued a clear call to the Government to leave Cash ISAs alone.
“Cash ISAs are an essential tool for millions of savers across the UK, allowing them to save for key life moments like buying a house or planning for retirement,” she said.
“Cutting the Cash ISA allowance would be a massive blow to millions across the UK. We urge the Chancellor not to restrict this tool, and to provide peace of mind by confirming as a matter of urgency that the annual allowance will be staying as is.”
