As Chancellor Rachel Reeves looks to evaluate cash ISAs, Martin Lewis warns that the £20,000 tax-free savings limit could be ‘killed off’ in the very near future.
In a recent edition of his newsletter, the Money Saving Expert (MSE) founder added weight to rumours the threshold will be cut to just £4,000 later in 2025.
‘It’s being talked about in political and policy circles,’ he explained in a video. ‘What we don’t know is if anything has been decided – and if it has, what has been decided.’
It’s likely any changes would be confirmed in October’s Autumn Budget, but according to the consumer champion, ‘nothing is certain’.
‘The concept behind it is that it’d encourage people to put the money in shares ISAs instead,’ he commented. ‘Personally, I’m sceptical if it’d work – many will just keep saving but pay more tax.’
It’s a daunting prospect given an estimated 7.9 million Brits currently save using a cash ISA, which is exempt from tax up to on an annual allowance of £20,000.
And while the plans haven’t yet been confirmed by the Treasury, Martin has some advice to ensure your nest egg is protected regardless.
The new tax year began on April 6, with the 2025/2026 allowance meaning you can save up to £20,000 in a cash ISA between now and next April.
According to Martin, if the rumoured limit change does happen, it wouldn’t impact any money you’ve already deposited, ‘it’d just cut what you can put in, in future.’
He continued: ‘Whether it’d start immediately, or in January or April 2026, no one knows (including at this point, I suspect, Rachel Reeves).
‘Yet if you plan to save in a cash ISA, all of this would suggest getting it in sooner would seem safer.’
However, he also urges people to take advantage of the various offers and rates available, and carefully consider the best provider for them.
Appearing on This Morning, Martin claimed that the vast majority will benefit from using their ISA allowance, but recommended reviewing accounts taken out years ago.
If ‘you’re in an absolutely pants cash ISA with a very low interest rate, which if you’ve had it for ten years’, he said it may be best to ‘get out’ and switch to a better performing option.
Although the jargon around allowances, tax, and fixed rates may make it seem a little confusing, the MSE founder added: ‘A cash ISA is just a savings account you don’t pay tax on. Don’t overcomplicate it.’
There is one thing you need to do differently when you’re moving ISA savings around though: always transfer rather than taking matters into your own hands.
‘You go to the new provider, and on the application form it will ask, “Do you want to transfer any money across?”‘ explained Martin. ‘That’s how you keep the ISA status. Do not just withdraw the money yourself.’
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