After weeks of speculation and concern among savers, Chancellor Rachel Reeves has reportedly decided not to cut the annual £20,000 Cash ISA allowance in her upcoming Mansion House speech on July 15. Despite earlier reports and industry fears that the Government would slash the tax-free savings threshold, potentially to as low as £4,000, sources now confirm that the current limits will remain in place for the time being.

The Chancellor faced mounting backlash from major lenders and building societies, who warned that reducing the Cash ISA allowance could harm both savers and the broader mortgage market, as retail deposits are crucial for lending. Data from some providers showed a surge in Cash ISA applications last week, reflecting public anxiety over possible changes.

Instead of immediate reforms, the Chancellor is expected to shift focus towards improving access to investment information and support, aiming to encourage more people to consider stocks and shares without forcing them out of cash savings.

The Government will continue consulting with industry stakeholders about potential ISA reforms, but no drastic measures are expected in the short term.

Harriet Guevara, chief savings officer at Nottingham Building Society, said: “This is encouraging news for both savers and lenders. We have consistently advocated for preserving the full allowance. Cash ISAs are crucial for millions seeking to bolster their financial stability over time, especially in the current economic environment.”

While the £20,000 ISA limit remains untouched, the Treasury has confirmed it is still reviewing options to reform ISAs, aiming to “strike the right balance” between cash and equities.

The intention is to help savers garner better returns and stimulate investment in the UK economy, but any changes will be approached cautiously and in consultation with the sector.

For now, savers can continue to deposit up to £20,000 a year across all ISA types, including Cash ISAs, without fear of an imminent cut.

The Government’s U-turn has been welcomed by savings professionals, who argue that rushed changes could have undermined confidence and penalised those who rely on cash savings for financial security.

Adam French, consumer expert at Moneyfactscompare.co.uk, said: “The Government’s desire to stimulate growth should not come at the cost of savers who are not looking to invest, and reports that the Chancellor is set to push pause on plans to cut the Cash ISA limits is welcome news.

“Slashing the cash ISA allowance risks raising mortgage costs, with various mutuals making it clear how vital cash ISAs are as a source of funding, which could cause chaos in the housing market. Clearly, there would have been real consequences if any cut to the cash ISA allowance had not been thought out thoroughly.

“Many savers are fearful of stocks plunging and losing a portion of their original investment. Equipping savers to navigate this volatility instead requires a change in our cultural, educational and advice approach to saving and investing.”

Andrew Craddock, chief executive of Darlington Building Society, said: “We’re encouraged to hear that the Government is taking another look at the proposed changes to ISA allowances. We’ve always said that Cash ISAs play a vital role for everyday savers – people who simply want a safe, accessible way to grow their money without unnecessary risk.”

A Treasury spokesperson said: “Our ambition is to ensure people’s hard-earned savings are delivering the best returns and driving more investment into the UK economy.”

First launched in 1999, Individual Savings Accounts (ISA) are a tax-efficient savings or investment account available to UK residents. There are four main ISA types: Cash ISAs, Stocks and Shares ISAs, Lifetime ISAs, and Innovative Finance ISAs.

Cash ISAs function like a standard savings account, but all interest earned is tax-free.

Stocks and Shares ISAs allow you to invest in shares, funds, or bonds, with all investment growth and income shielded from tax.

Innovative Finance ISAs are slightly more risky, but these accounts let you invest in peer-to-peer lending or crowdfunding platforms, with returns protected from tax.

Finally, Lifetime ISAs are designed to help people save for a first home or retirement, with an annual contribution limit and a Government bonus of up to a maximum of £1,000 per year.

There is a total ISA allowance that runs each tax year, starting from April 6 to April 5, and the maximum you can deposit across all your ISAs is currently £20,000.

You can split this allowance across different types of ISAs, and recent rule changes allow you to pay into multiple ISAs of the same type in the same tax year, provided you don’t exceed the overall limit.

To open an ISA, you must be at least 18 years old (or 16 for a cash ISA) and a UK resident for tax purposes. People aged under 18 can instead launch a Junior ISA, which allows tax-free savings of up to £9,000 per year.