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Rachel Reeves to Cut Cash ISA Allowance from £20,000 to £5,000 and Warns of Tax Rises Amid £6bn Welfare Shortfall

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Updated Jul 5, 2025, 10:51 AM

Chancellor Rachel Reeves is expected to announce a reduction in the annual tax-free cash Individual Savings Account (ISA) allowance from the current £20,000 to as low as £5,000 in her upcoming Mansion House speech. This move follows a government retreat on welfare reform, which has created a £6 billion shortfall in planned savings. Cabinet Office minister Pat McFadden and Reeves herself have indicated that this financial gap will likely necessitate tax increases in the forthcoming autumn budget. Reeves has warned that the tax rises could be more challenging than the £40 billion package introduced in November. The potential tax increases may affect income tax, National Insurance, or VAT, with middle earners expected to bear a considerable portion of the burden. The decision to water down the welfare reform bill and the associated costs have drawn criticism and sparked debate about the government's fiscal strategy and its impact on savers and taxpayers.

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Steven Swinford

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Exclusive: Rachel Reeves has warned cabinet ministers that tax rises in the autumn budget are likely to prove even more challenging than the £40 billion package she imposed in November The chancellor told cabinet on Tuesday that the decision to abandon welfare reforms meant