Will Labour scrap Cash ISAs?

What are the ISA rumours?

The main rumour going around is that Cash ISAs will be scrapped completely. The idea being too much is held in cash rather than put into investments via a Stocks & Shares ISA. In theory, the more money that is invested, the better economic growth will be.

This isn’t the first time we’ve seen speculation around changing ISA rules. The Resolution Foundation has previously suggested there should be a lifetime cap of £100,000, while there have also been calls to reduce the £20,000 annual allowance.

Could it happen?

The source of this idea to end Cash ISAs? Well it’s “city bosses”, aka those who stand best to benefit from getting rid of Cash ISAs. It’s been reported this was suggested in a meeting between Reeves and banks. But that’s it, just a suggestion at a meeting.

And building societies in particular have come out strongly against the proposal. They say that without Cash ISAs they’d lose the funds they use to help offer people mortgages and better interest rates.

Labour haven’t confirmed or denied that ISAs are under review, but they have said they are looking at options for growth, while they’re also still looking for ways to generate tax income.

All that has been announced is a review of the Lifetime ISA, which certainly needs some reform with housing prices exceeding the limit in parts of the UK and many people angry about the penalty for removing your cash.

And there’s certainly a good argument to make ISAs simpler – last year’s rule changes haven’t really helped savers as hoped.

So in theory, there could well be changes to ISA under this government, but whether it’s one of these rumours or something completely different, if anything at all, it’s impossible to say.

Should you worry?

For now, there’s nothing concrete to be concerned about. And even if changes do come, it’s incredibly unlikely that it’ll impact existing savings. To make changes retrospectively would be very hard to implement and incredibly unpopular.

So say you already have money saved or invested in ISAs using the annual allowance from previous years. That would most likely not change, and interest and gains made on that cash would remain tax-free.

In fact, if there are any changes, it’s also unlikely that they’d come into play in the 2025/26 financial year. Though previous governments have held more than one ‘fiscal event’ (Aka Budgets or financial statements) in a year, Labour have committed to doing this only in an Autumn Budget.

While there is a Spring Statement in March, it would be a surprise to see such a massive reform announced then, especially as there’d be just a few weeks to implement those changes.

And Labour have been keen to consult on big changes, such as a reform of the Lifetime ISA, which would take a good few months to collate, and then analyse, before deciding on a policy.

So even if there is a change, it would most likely not be enforced until the start of the 2026/27 financial year, which begins in April 2026 – more than a year away.

And if the key rumour on scrapping Cash ISAs does come true – no one is calling to end other ISAs. It’d still be possible to shelter your money from the tax man via investing in an ISA. And while a Stocks & Shares ISA is probably a better product for longer term savings (at least five years), there are lower risk options available in these ISAs that act a lot like cash.

Most people also don’t need to worry about any call to reduce the annual £20,000 allowance, as just a small fraction of savers are able to fill that each year. Yes some big earners or those with a windfall would miss out if it was smaller, but in the scheme of things that wouldn’t be massively unfair.

Get the best of our money saving content every Thursday, straight to your inbox

+ Get a £20 Quidco bonus (new members only). More details

Should you do anything now?

Even though it’s all rumours right now, you never 100% know there won’t be changes that are worse for you personally. So I’d still suggest you look to use as much of your ISA allowance as you can before the 5 April.

Since there is a chance there could be changes to how they work and allowances going forward, if you put money in ISAs now, you’re protecting that cash from possible reform.

And not just to ISAs. There’s just as much chance the Personal Savings Allowance could be reduced. So having cash in an ISA would protect your interest from the tax man if that was to happen.

Remember, there’s a £20,000 cap that can be put into ISAs, so if you have that outside of an ISA – whether in cash, Premium Bonds or investments – moving it inside an ISA’s protection makes a lot of sense.

Plus with the best paying easy access accounts right now happening to be Cash ISAs, you’re going to be getting the best rates going.