November Budget could halve the Cash ISA allowance and launch a ‘British’ equity push—supporters hail a US‑style investment culture, while lenders and consumer groups warn of a backlash

LONDON — UK chancellor Rachel Reeves moved back to the front foot on savings reform, signalling that her 26 November Budget will try to tilt the country’s £trillions in household deposits toward shares in British companies. After pausing plans over the summer, Reeves is again weighing an overhaul of tax‑free Individual Savings Accounts (ISAs) that could halve the amount people can shield in Cash ISAs to £10,000 while keeping the overall annual ISA limit at £20,000. The aim: nudge savers into stocks, revive London’s public markets and import something closer to the US’s equity‑owning culture.

Officials say the Treasury is also revisiting a ‘British ISA’ concept—an extra £5,000 tax‑free allowance ring‑fenced for investment in UK assets—and considering a wider campaign to improve financial literacy and ease rules around guidance so that people feel more comfortable making long‑term investments. Together, these steps would reprise parts of Labour’s summer Mansion House package while pushing further to channel savings into new share issues and growth‑oriented funds.

The politics are tricky. Reeves shelved similar cash‑limit changes in July after a rapid backlash from building societies, banks and consumer advocates worried about undermining simple, low‑risk savings at a time of still‑elevated living costs. Those critics have not gone away. Building societies rely heavily on Cash ISA inflows to fund mortgages, while brokers warn that abrupt shifts risk confusing customers who prize the ISA brand’s simplicity. Inside Whitehall, officials are gaming out ways to soften the edges—delaying implementation until April 2026, for example, and grandfathering existing cash balances—while insisting the long‑run benefits of more equity ownership outweigh the short‑term discomfort.

Reeves’s core argument is about growth. Half a generation of British savers has been rewarded for sitting in cash. Near‑zero interest rates in the 2010s were followed by an inflation spike that pushed bank rates to heights unseen since before the financial crisis. The result is a country that keeps an unusually large share of wealth in deposits, even inside ISAs that are meant to encourage long‑term, tax‑efficient investing. Treasury allies say that if more of those pounds backed UK shares—especially small and mid‑caps—it would deepen liquidity in the London market, lower the cost of capital and help finance the energy transition and other productive investment.

Supporters point to the US, where a broad equity culture, turbo‑charged by retirement accounts and exchange‑traded funds, has left households with a larger direct stake in domestic companies. They argue that, over time, equity returns have outpaced cash by a wide margin, and that widening the share‑owning base would bind the public closer to the fortunes of British business. In practice, they say, most households would not ‘lose’ the ability to hold cash: the overall £20,000 ISA allowance would be unchanged, and savers could still park up to £10,000 a year in cash tax‑free—more than many people can afford to save.

Yet the numbers illustrate why the Treasury is wrestling with behavioural reality. In the 2022–23 tax year, Britons put far more into Cash ISAs than into Stocks and Shares ISAs. That preference has persisted even as stock markets rallied this year and as the government signalled friendlier policies toward public listings. Advocates of reform accept that ISA plumbing alone will not flip behaviour: it will take clearer communication, better default options and simple, low‑fee products that emphasise diversification and patience.

There are design choices aplenty. Halving the cash allowance is the headline‑grabbing lever, but Treasury officials are also weighing whether to scrap stamp duty on share purchases inside ISAs, to bundle UK‑equity exposure into default funds, or to offer modest matching incentives for first‑time investors. Policymakers are studying evidence that default nudges—from auto‑enrolment in pensions to simplified, age‑appropriate portfolios—matter more than lectures about market returns.

The ‘British ISA’ idea remains alive, albeit contentious. In principle, allowing an extra £5,000 tax‑free if the money goes into UK assets could direct fresh flows into domestic equities and corporate bonds without penalising cash savers. But fund platforms and consumer groups warn this would add complexity to an already confusing alphabet soup of ISA types. Some suggest the better route is to keep a single, simple wrapper and move the incentives inside it—removing frictions, cutting costs and clarifying that mainstream, diversified funds are appropriate for most savers.

One risk is that the reform is perceived as a stealth tax on prudence. For higher‑rate taxpayers with large cash balances, ISAs protect interest from income tax in a way that ordinary savings accounts do not. A lower cash cap could push some of those savers out of the ISA system, or force them into assets they do not understand. The Treasury’s counter is that most people’s interest already falls within their personal savings allowance and that the bigger prize—higher long‑term returns and stronger domestic capital markets—warrants the change. Diplomacy with mutuals and building societies, which see Cash ISA flows as a funding lifeline, will be crucial to avoid a credit squeeze.

Political management will shape the rollout. Labour came to power promising to restore stability and to ‘crowd in’ private investment. Reeves’s first year has been defined by fiscal constraint and careful sequencing—deferring giveaways until the public finances allow. The chancellor has also tried to align savings policy with pension reform, including a strengthened Mansion House Accord under which large schemes pledged to allocate more to UK growth assets. A coherent story about how pensions, ISAs and the stock market fit together is likely to feature in the Budget speech.

Industry is preparing its own wish‑list. Brokers argue that if ministers want more ISA money in shares, they should prioritise the frictions that make investing feel expensive or arcane. That means cutting or abolishing stamp duty on share purchases inside ISAs, streamlining transfers, ensuring fractional share dealing is widely available, and encouraging low‑cost, globally diversified funds as the default. Platforms want clear guardrails so they can give ‘guidance’ at scale without falling foul of advice rules, while consumer groups want stronger risk warnings and standardised disclosures.

For all the noise, the shift Reeves seeks is incremental rather than revolutionary. The government is not proposing to ban cash saving, nor to force anyone into volatile assets. Rather, it is trying to rebalance incentives at the margin to support a broader base of long‑term investors in the UK market. If the policy lands well, it could help address the long‑running malaise of low business investment and a shrinking public markets ecosystem. If it lands badly, it could be painted as a raid on savers or a technocratic fix to a cultural challenge.

The next six weeks will determine the tone. Treasury consultations with banks, mutuals, platforms and consumer bodies are under way, with the chancellor’s team testing whether a phased introduction, grandfathering, and a dedicated UK‑assets allowance can buy consent. At stake is more than the mechanics of one tax wrapper. It is a bet that a modest nudge on ISAs, alongside pensions reform, can change how Britain saves and invests—and, ultimately, how fast the economy grows.

What to watch between now and 26 November:
• The fate of the Cash ISA cap: does the Budget set a 2026 start date and grandfather existing balances?
• A ‘British ISA’ add‑on: extra allowance for UK assets, or a simpler single‑wrapper system?
• Frictions: any moves on stamp duty within ISAs, transfer rules, and simplified guidance.
• Coordination with pensions: whether ISA changes are paired with fresh Mansion House commitments.
• Consumer protection: clearer disclosures and default diversified funds to avoid mis‑selling risks.

Reeves has framed her mission as ‘securonomics’—rebuilding economic strength through stable policy and higher business investment. Winning a culture shift in how households save will require not just fiscal levers but trust, clarity and time. The Budget will show how far she is willing to go.