What could the future hold for Cash ISAs?

Since their introduction in 1999, Individual Savings Accounts (ISAs) have become one of the most popular ways for people to grow their savings and investments tax-efficiently.

Their appeal seems to be stronger than ever, with data from Moneyfacts revealing that April 2025 saw a record-breaking £14 billion in net household deposits into ISAs.

This is the highest monthly amount on record, showing just how many people across the UK continue to rely on ISAs to hold their savings and investments.

Despite this popularity, ISAs have recently come under the spotlight, with increasing debates about how they might change in the near future.

While nothing has been confirmed yet, several proposals and government comments suggest that ISAs – especially Cash ISAs – may change in the near future.

Continue reading to discover what the future may hold for Cash ISAs, and why it’s helpful to understand what this might mean for you.

ISAs allow you to tax-efficiently save and invest your wealth

Simply put, ISAs are savings and investment accounts that shield your interest or investment returns from Income Tax, Dividend Tax, and Capital Gains Tax (CGT).

Each tax year, you can contribute up to the ISA allowance, which as of 2025/26, stands at £20,000. This limit applies across all of your ISAs and doesn’t carry forward to the next year.

While there are several different types of ISA, two are especially the most relevant regarding potential reforms.

Cash ISAs

A Cash ISA works much like a regular savings account, where you make contributions and typically generate interest on your savings.

You can usually have an easy access Cash ISA, where you can withdraw funds at any time without penalty. Or, you can lock your savings away for a set period in exchange for a higher interest rate in a fixed-term Cash ISA.

Stocks and Shares ISAs

A Stocks and Shares ISA allows you to invest your wealth into a range of assets, such as:

• Shares

• Funds

• Bonds.

Of course, this brings added risk, as the value of your investments can rise as well as fall.

Still, over the long term, it could offer more competitive returns, protecting your wealth from the eroding effects of inflation (more on this later).

There have been rumours of ISA reforms on the horizon

In her Spring Statement, the chancellor, Rachel Reeves, commented on the government’s interest in reforming ISAs.

She stated: “The government is looking at options for reforms to ISAs to get the balance right between cash and equities to earn better returns for savers, boost the culture of retail investment, and support the growth mission.

“Alongside this, the government is working closely with the Financial Conduct Authority to deliver a system of targeted support to give people the confidence to invest.”

As these statements show, the government has made a commitment to “kick-start economic growth” and encourage investment in equities rather than cash savings. In turn, this has led many experts to believe that ISA reforms might be on the horizon.

As of June 2025, inflation – as measured by the Consumer Prices Index (CPI) – stands at 3.4% in the 12 months leading to May 2025, the Office for National Statistics reveals.

While this is certainly much lower than it has been in recent years, it is still above the Bank of England’s 2% annual target.

If you rely too heavily on cash savings, inflation could gradually erode the real-term value of your wealth.

While Cash ISAs may offer a level of security, they often struggle to keep pace with rising prices.

Conversely, Stocks and Shares ISAs typically offer more competitive returns, giving your wealth the chance to outpace inflation.

Despite this, a significant portion of the UK still appears to be cautious.

MoneyWeek reveals that 61% of adults with £10,000 or more in investable assets are holding at least three-quarters in cash, missing out on potential long-term returns.

To help change this behaviour, the government might consider reducing the amount you can place in a Cash ISA, while keeping the overall allowance unchanged.

For instance, you may only be able to contribute £4,000 to your Cash ISA each year, with the remaining £16,000 reserved for your Stocks and Shares ISA, or one of the other forms of ISA.

Another possibility is the simplification of ISAs, merging Cash ISAs and Stocks and Shares ISAs into a single account.

Some experts have pushed back against the idea of an ISA reform

While the idea of ISA reforms might initially sound admirable, promoting an investing culture and stimulating economic growth, not everyone is convinced they will achieve the desired results.

Indeed, IFA Magazine reveals that the investment platform, AJ Bell, claims that scaling back and simplifying Cash ISAs won’t successfully shift consumer behaviour. In fact, research shows that only 1 in 5 would move to investing if the Cash ISA allowance were reduced or abolished.

They have argued that any restrictions on the amount of money you can hold in a Cash ISA might only serve to complicate the tax-efficient accounts further. This is because there may be more complex restrictions on transfers between your various ISA accounts.

Journalist Martin Lewis added his voice to the debate, stating that if the government genuinely wanted people to invest, it should focus on national education initiatives.

As reported by MoneySavingExpert, he believes that increasing awareness and an understanding of investing is a better approach than simply imposing tighter restrictions on cash savers.

No matter what happens, a financial planner could help you stay abreast of potential changes

While it remains to be seen what direction the government will take regarding reforms, nothing can be dismissed at the time of writing.

Still, no matter what might happen, a financial planner could help you stay abreast of any changes.

Rather than trying to react to changes as they happen, we could help you take proactive steps to ensure that your ISA investing and saving strategy aligns with your goals, tolerance for risk, and time frame.

Our bespoke advice could even help you secure some much-needed peace of mind knowing that, if ISAs are reformed, you’ll be ahead of the curve.

If you’d like to benefit from this support, please email info@athertonyork.co.uk or call us on 0208 882 2979 to learn more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. 

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

The Financial Conduct Authority does not regulate tax planning.