Nottingham Building Society says Budget plans to cut the cash Isa tax-free allowance to £12,000 are “deeply disappointing” and will hit mutuals hard.

In the Autumn Budget today, Chancellor Rachel Reeves said the current £20,000 annual Isa allowance would have to include £8,000 of investment from 2027.

Otherwise the cash Isa limit is £12,000 each year, except for the over-65s, who will keep the current full £20,000 allowance.

The change will come in from 6 April 2027.

Nottingham Building Society chief savings officer Harriet Guevara said: “The decision to slash the annual cash Isa allowance from April 2027 is a sucker punch for savers and deeply disappointing for lenders. We support the government’s aim to boost an investing culture in the UK, but restricting choice is not the way to do it.

“Two thirds of our cash Isa customers have used the full £20,000 allowance so far this year. These aren’t people with excess wealth – they’re individuals and families working hard to save for the future.

“Limiting cash Isa deposits is also at odds with this Government’s own pledge to double the size of the mutuals sector, threatening to shrink mutual lending capacity, limit access to homeownership, and stall the long-term growth of building societies that reinvest in their members and local communities.”

Moneyfacts finance expert Rachel Springall said: “The cash Isa limit cut can have repercussions on institutions, like mutuals, who use Isa deposits as a source of funding, so we could start to see mortgage rates increase, which would cause chaos in the housing market.”