Chancellor Rachel Reeves is being urged to avoid drastic reforms to ISAs amid "real concerns' over the potential impact on savings in Britain.
Labour ministers are understood to be considering a cut the £20,000 tax-free cash ISA allowance as part of reforms aimed at channelling more money into London-listed stocks.
The Treasury is currently debating with City of London figures about the level at which the allowance should be capped, with reports suggesting it could be reduced to £4,000.
This rumoured reduction would represent one of the most significant changes to the UK's savings markets since ISAs were introduced by Gordon Brown in 1999.
Rachel Reeves is facing pushback to rumoured ISA reforms
GETTYA Government figure indicated to The Financial Times that the threshold for tax-free cash ISAs is likely to be cut, though the exact level remains under discussion.
City minister Emma Reynolds met with senior executives from banks including HSBC, Barclays, NatWest, Lloyds Banking Group, Nationwide and TSB on Thursday to discuss reforming the ISA market.
The Treasury had also scheduled a meeting on Monday with chief executives of retail investment sites, including Dan Olley from Hargreaves Lansdown and Michael Summersgill from AJ Bell.
These discussions are part of a series between the Treasury and various City stakeholders on reforming the ISA market.
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ISAs are useful tools for those looking save and avoid paying tax
GETTYSome City groups have strongly lobbied for reducing the tax-free cash allowance in recent months, viewing it as a way to attract money into equity funds and domestic shares.
In a statement, Reeves "At the moment, there is a £20,000 limit on what you can put into either cash or equities, but we want to get that balance right."
She emphasised her desire to foster "more of a culture in the UK of retail investing" to "earn better returns to savers and to support the ambition to grow the economy, creating good jobs right across the UK".
Savers have shown increasing interest in cash ISAs, with £4.2billion poured into these accounts in March, up by almost one-third compared with the previous year, according to investment site Hargreaves Lansdown.
However, not all stakeholders are convinced that reducing the cash ISA allowance would achieve the Government's desired aims.
Harriet Guevara, the chief savings offficer at Nottingham Building Society, previously expressed concerns about the potential reform.
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Treasury officials are understood to be discussing a cut to the tax-free allowance attached to ISAs
PA"While we support the Government's broader efforts to stimulate economic growth and drive investment in UK businesses, we remain steadfast in our view that there's no guarantee that reducing the cash ISA allowance would actually help - and in fact there's a real concern that it will simply lead to people saving less," she said.
Guevara added that the building society was ready to engage in "open and constructive dialogue" with the Government regarding the ISA regime.
As it stands, the tax-free allowance for ISA savers sits at £20,000, which can be split across different types of accounts; including cash ISAS.
Lifetime ISAs, which are reserved for first-time homebuyers, have a tax-free allowance of £4,000. However, the Government provides account holders a 25 per cent on top of their savings when money is used for purchasing a property.
