The decision was brought in by previous Chancellor Rachel Reeves and would have applied to savers under the age of 65 from April 2027. This was to encourage more people to invest in the Stocks and Shares ISA, rather than save.
The announcement was met with criticism, suggesting this would make mortgages more expensive, as the industry said the savings product was a key source of funding for lending activity.
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said the decision removed “one of many complexities” due to come into force next year.
She added: “This U-turn will come as a sigh of relief for providers, particularly mutuals, which rely on ISA deposits as an important source of funding. A reduction in the allowance could have weakened the appeal of Cash ISAs, reducing the flow of deposits, which could have inflated lending costs.”
Isabella Galliers-Pratt, senior investment director at Rathbones, said the decision would be a “victory for common sense” if confirmed, adding: “You don’t create investors by penalising savers.”
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