Nottingham Building Society said the budget plan to cut Isa cash tax-free allowance to £12,000 was “hugely disappointing” and would hit mutual funds hard.
In today’s Autumn Budget, Chancellor Rachel Reeves said the current annual Isa allowance of £20,000 must include an investment of £8,000 from 2027.
Otherwise, the cash Isa limit is £12,000 a year, except for those aged 65 and over, who will keep their current full £20,000 allowance.
This change will take effect on April 6, 2027.
Harriet Guevara, chief savings officer at Nottingham Building Society, said: “The decision to significantly cut the annual Isa cash allowance from April 2027 is a blow for savers and deeply disappointing for lenders. We support the government’s aim to promote an investment culture in the UK, but restricting choice is not the way to achieve this.”
“So far this year, two-thirds of our Cash Isa customers have used their full £20,000 allowance. These are not people with excess wealth – they are individuals and families trying to save for the future.
“Restricting Isa cash deposits also contradicts this government’s own commitment to double the size of the mutual sector, which could reduce mutual lending capacity, limit opportunities for home ownership and hinder the long-term growth of building societies that reinvest in their members and local communities.”
Rachel Springall, finance expert at Moneyfacts, said: “The reduction in Isa cash limits may have an impact on institutions such as mutuals who use Isa deposits as a source of funding, so we may start to see mortgage rates rise, which would cause disruption in the housing market.”
