The amount savers under 65 can put into cash ISAs will be slashed from £20,000 to £12,000 as the chancellor tries to revive the UK stock market after a five-year investor exodus.

Although the overall £20,000 ISA allowance will remain, Rachel Reeves said from April 2027 £8,000 of that must go into a stocks and shares ISA.

Plans to digitalise ISA administration and applications have been delayed until 2028 but current subscription levels would remain in place until 2030/31, the Treasury said.

Richard Stone, chief executive of the Association of Investment Companies, welcomed the move to bolster stocks and shares ISAs which he said was a “milestone” to creating an investment culture in the UK.

HMRC statistics shows that in 2022/23 over a quarter of the 7.1m subscriptions into cash ISAs exceeded £12,500.

“The new cash ISA limit will incentivise more than 2m people to start investing in the stock market – rather than taking the risk of their long-term savings being eaten away by inflation,” he said.