Could Changes to the Cash ISA Allowance Prompt a Shift Toward Investment ISAs?
With speculation mounting that Chancellor Rachel Reeves may reduce the annual Cash ISA allowance from its current £20,000 – potentially halving it to £10,000 – CapitalRise considers how savers and investors are reassessing how best to make use of their remaining tax-free ISA entitlement.
The proposed reforms are part of a broader push to encourage a shift from cash savings into investments that support wider economic growth, with Reeves aiming to foster a more US-style investment culture. Treasury officials have held meetings with financial services firms to explore options, and City Minister Lucy Rigby recently highlighted that long-term stock market investments could more than double returns compared to Cash ISAs.*
While Cash ISAs remain a popular choice for their low-risk profile, accessibility of funds, and FSCS protection, they have often struggled to keep pace with inflation. According to research from CapitalRise earlier this year, UK consumers lost over £1.15 billion in real terms in the past 12 months by holding money in Cash ISAs, as average interest rates lagged behind inflation.**
For those with a higher risk tolerance, Innovative Finance ISAs (IFISAs) may offer an alternative route to tax-free returns. CapitalRise’s IFISA allows eligible investors to participate in loans secured against prime UK property developments via its online platform.
CapitalRise – which was founded in 2016 by experienced property developers – provides access to prime real estate-backed investments, which were previously only available to those with millions to invest. With CapitalRise, these opportunities are now accessible to all eligible investors from just £1,000. CapitalRise investors earned an average return of 9.26% per annum on repaid loans over the 2024 calendar year.
However, it is important to note that an IFISA is not directly comparable to a Cash ISA. While Cash ISAs offer capital protection and are covered by the FSCS, IFISAs carry significantly higher risk. Capital invested through an IFISA is at risk, is not covered by FSCS, and returns are not guaranteed. Investors should only commit funds they can afford to lose and should carefully consider the investment’s risk profile, duration, and liquidity in advance.
Nonetheless, the potential reduction of the Cash ISA allowance has certainly sparked a debate. Building societies argue that such a move could impact mortgage funding and make home loans more expensive. Meanwhile, proponents of ISA reform believe that encouraging savers to invest in UK equities could boost economic growth and deliver better long-term outcomes for individuals.*
As the ISA landscape continues to evolve, and we await the Chancellor’s Budget on 26th November, now may be a good time to review your options. Whether you choose a Cash ISA, Stocks & Shares ISA, or indeed an IFISA, the key is to ensure your choice aligns with your financial goals and risk appetite.
To learn more about the CapitalRise IFISA, visit: www.capitalrise.com/innovative-finance-isa
* Financial Times, ‘Rachel Reeves revives plans to overhaul cash Isas’, Emma Dunkley and George Parker, 14th October 2025
** Daily Express, ‘Make the most of ISA perks while you can’, Harvey Jones, 2nd April 2025
