The Chancellor is expected to announce new plans to cut the cash ISA allowance in her Mansion House speech next month, according to reports.

The Financial Times suggested that Rachel Reeves will consider reducing the annual limit for cash ISAs from £20,000, which is the amount that savers can currently shield from tax.

In an interview with the BBC in May, the Chancellor indicated that the £20,000 ISA allowance would remain in place amid speculation that the Government could reform the way ISAs work. However, she refused to rule out the idea of cutting the cash ISA allowance while retaining the overall £20,000 limit across all types of ISA products, such as stocks and shares ISAs.

In her Spring Statement in March, Reeves held off from making changes to ISAs but indicated that plans to tweak allowances were on the agenda.

Head of personal finance at Moneybox, Brian Byrnes, commented that the ongoing speculation around potential changes to the cash ISA is “causing uncertainty and confusion” for consumers.

“Simply cutting the tax fee allowance on cash ISAs will not necessarily prompt equal inflows into investing products either,” Byrnes added.

“People opt to use cash ISAs over their stocks and shares counterparts for a multitude of reasons, including risk aversion, and reducing the amount of money these savers can put into the cash ISA is unlikely to change this mindset.

“Driving a meaningful cultural shift towards investing requires policies that make investing easier and more attractive to the UK public. If the Government wishes to boost the level of retail investment in the UK, they must do all they can do to provide savers with the tools to build financial confidence and save and invest more.”

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