Published: 3 March 2025
Since media speculation first began in early February about the future of Cash ISAs, we’ve heard from hundreds of members who are opposed to such changes, are worried by the prospect of having their choices narrowed or think it’s unfair to have the tax-free cash savings incentive removed.
We support their views and, like many other Cash ISA providers, are actively seeking to inform the Government of these objections.
What’s the background to this?
It is reported that some companies which manage investments have asked the Government to change the rules and either end Cash ISAs completely or significantly reduce the annual amount you can save in them from the current limit of £20,000 per tax year.
Their argument is that doing this would encourage more people to seek potentially larger returns for their money through saving in a Stocks and Shares ISA. They also argue that putting money in a Stocks and Shares ISA would support growth in UK companies. Stocks and shares may offer better returns than cash over the long-term but stock market based investments aren't like building society savings accounts. The value of investments can go down or up.
It’s important to note, no new rules have been announced and we are not aware of any decisions having been made by Government.
Why is Leeds Building Society opposed to changes in Cash ISAs?
There are seven key reasons:
• Lots of savers understand the potential long-term benefits of investments but the vast majority want to stick with cash. As recent Building Societies Association research shows[i], two-thirds (67%) of Cash ISA savers said they knew about Stocks & Shares ISAs and another 30% had heard of them, but 90% of Cash ISA savers said that it is important to them that they get back at least the amount they have saved or invested
• Investments will not be suitable for everyone. For example, people saving up to buy a home and many older people may not be looking to take the long-term approach required for investments.
• We believe it is unfair to limit customer choice, and effectively forcing customers into non-ISA savings accounts could cost members hundreds of pounds in extra tax. For example, a higher rate tax payer with £30,000 invested would pay £730 in tax if they saved in our equivalent one year bond rather than a one year Cash ISA[ii].
•If savers did switch to investments, there is limited evidence that their money will go towards UK businesses. Analysis of UK stocks and shares investments by the Investment Association shows that only around £1 in every £10 (11.5%) is invested in UK companies[iii].
•Instead, there is a high risk of impacting growth in the UK mortgage and housing markets. That’s because, as a building society, we fuel much of our mortgage lending through the savings our members deposit with us. Based on our forecasting, removing this funding risks making mortgage rates more expensive for borrowers.
• Improving access to affordable financial advice is a better way of increasing people’s ability to invest with confidence. The Government has signalled its intent to review the regulatory requirements around providing financial advice and this should be fully delivered before further changes were considered.
• Creating a level playing field in the financial services sector and doubling the size of the mutual sector could deliver growth. A change to the amount you could save in Cash ISAs would drive in precisely the opposite direction given that mutual building societies account for about 40% of the Cash ISA market.
Richard Fearon, Leeds Building Society Chief Executive, said: “Significantly reducing the Cash ISA annual allowance, or worse still scrapping them altogether, is unlikely to create greater investment in the UK but would be likely to lead to bigger tax bills for savers and higher repayments for mortgage holders.”
What should savers do now?
No changes have been confirmed and this remains speculation. But as we reach the end of the tax year it may be a good opportunity for you to consider your savings accounts and whether they still meet your needs. In terms of a Cash ISA, that includes checking whether you’ve used your full annual allowance if you can afford to.
What happens next?
We’ll continue to engage with the Government and other organisations to represent our members and argue against any changes to Cash ISA rules. We’ll keep our members informed of our progress and any decisions that are taken by Government.
This article is not advice and you should seek independent financial or legal advice if needed.
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[i] Research conducted on behalf of Building Societies Association (BSA) by Opinium Research between 14th - 18th February 2025 among a nationally and politically representative sample size of 2,000 UK adults.
[ii] Based on annual interest of £1,230 earned on a balance of £30,000 in a 1 year fixed rate savings account with an interest rate of 4.10% minus £500 personal savings allowance for a higher rate tax payer.
[iii] https://www.theia.org/sites/default/files/2024-10/Investment%20Management%20in%20the%20UK%202023-2024.pdf The percentage of Funds under management going to UK equities was 11.5% in 2023.
