Savers are warned they face a £605million stealth tax raid by 2030 following Budget announcements.
Labour has frozen ISA allowances at £20,000, a figure unchanged since April 2017 when then-Chancellor George Osborne raised it from £15,000.
This extended freeze until 2030, meaning the allowance will have remained static for 13 years by the end of the decade.
The policy is expected to generate significant revenue for the Treasury as more savers are forced to keep money outside of tax-free ISAs.
In the 2029-30 tax year alone, the freeze is forecast to bring in £605million as an increasing number of savers pay tax on their interest.
If the allowance had kept pace with inflation, savers would be able to deposit nearly £26,000 in their ISA, figures show.
Without adjusting for inflation, the frozen allowance leads to a de facto reduction in its value
GETTYBy April 2030, calculations by Interactive Investor suggest the inflation-adjusted figure would rise to £29,500. This means Labour's extension of the frozen limit effectively blocks savers from shielding more of their wealth in ISAs.
Myron Jobson, expert at Interactive Investor said: "Without adjusting for inflation, the frozen allowance leads to a de facto reduction in its value.
"Inflation reduces the purchasing power of money over time, so a fixed Isa allowance allows you to save less in real terms each year."
The freeze affects all ISA types, with lifetime ISAs remaining at £4,000 and junior ISAs at £9,000. The Budget papers reveal a breakdown of the expected tax revenue from the ISA allowance freeze over the next six years.
The Treasury is set to earn £15million in 2026-27, £90million in 2027-28, £265million in 2028-29, and a substantial £605million in 2029-30. This gradual increase reflects the cumulative effect of the freeze as more savers exceed the static allowance.
Sarah Coles, personal finance expert at Hargreaves Lansdown said: "Providing certainty over allowances until 2030 provides very welcome stability to this cornerstone of people's finances.
"The downside of this certainty is that over time, the allowance will continue to drop in real terms, and become less valuable."
Despite fears of further restrictions, the Budget did not introduce a lifetime cap on ISA savings. The only change was the scrapping of the previously planned Great British ISA.
The freeze on ISA allowances will likely push more savers into paying tax on their interest outside of ISAs. This is due to the personal savings allowance, which is linked to income tax bands.
Basic-rate taxpayers can earn £1,000 in savings interest tax-free, but this drops to £500 for higher-rate taxpayers and disappears entirely for additional-rate taxpayers.
As wages rise and more people are pushed into higher tax brackets due to frozen income tax thresholds, their personal savings allowance may be reduced or eliminated.
Coles emphasised the importance of ISAs in this context: "This is why it is important to open a cash Isa so your savings are sheltered from any tax that would be incurred on interest."
The impact is particularly significant as savings rates have risen, meaning more people are affected even with smaller savings pots.
A Treasury spokesman defended the policy, saying: "The average subscription is around £6,000 across all ISA types making the £20,000 limit appropriate for the vast majority of savers."
