A year ago, savers were told that from April 2027 anyone under 65 would be limited to £12,000 a year in a cash ISA.
Many of you asked whether to rethink how you save. The new Chancellor has now settled the question.
The cash ISA limit stays at £20,000
John Healey confirmed in his Budget on 28 October that the planned cut will not go ahead. The full £20,000 allowance remains available in cash for savers of all ages, and the proposed restrictions on moving stocks and shares ISAs into cash have been dropped too. The change still needs regulations, which are expected in November.
Why the ISA tax wrapper matters more than ever
The bigger news may be outside the ISA. From April 2027, tax on savings interest will rise by a further two percentage points on top of an increase already in law.
A higher rate taxpayer will pay 44 per cent on interest above their £500 personal savings allowance.
With that allowance unchanged and frozen income tax thresholds pulling more people into higher bands, interest that was once tax free is increasingly being taxed. An ISA helps keep more of your savings out of reach of these increases.
Changes for first-time buyers
The penalty for using a Lifetime ISA towards a home costing more than £450,000 falls from 25 per cent to 20 per cent, so buyers in more expensive areas will at least get back what they paid in.
From April 2029, a new First Time Buyer ISA will replace the Lifetime ISA for new savers, with no upper age limit. Existing Lifetime ISA holders can carry on using their accounts.
The Chancellor is also exploring an incentive for first-time stocks and shares ISA investors, with details still to come.
What this means for you
Cash has an important role for emergency funds and short-term goals, but holding too much of it can mean losing ground to inflation over time.
Now that the rules are clearer, it is a good moment to check that your ISA allowance is working as hard as it can for you. We would be happy to help.
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