Big Changes Proposed for ISAs – What Do They Mean for Savers?

Individual Savings Accounts (ISAs) have long been one of the most tax-efficient ways to save and invest. However, the Government has recently announced a number of changes and proposals that could significantly alter how ISAs work over the next few years.

If you're wondering whether you need to take any action, here's what you need to know.

 

What hasn't changed?

The good news is that, for the current 2026/27 tax year, the overall ISA allowance remains £20,000. This means you can continue to save or invest up to £20,000 across your eligible ISAs without paying Income Tax or Capital Gains Tax on any growth or income generated.

For now, everything continues as normal.

 

Changes to Cash ISAs from April 2027

One of the biggest confirmed changes affects Cash ISAs.

From 6 April 2027, the maximum amount that people under the age of 65 can contribute to a Cash ISA each tax year will reduce from £20,000 to £12,000.

However, the overall ISA allowance will remain at £20,000, meaning the remaining £8,000 could still be invested into a Stocks & Shares ISA or another eligible ISA.

For those aged 65 and over, the Cash ISA allowance is expected to remain at £20,000.

The Government says these changes are intended to encourage more long-term investing rather than holding large amounts in cash.

 

New rules for Stocks & Shares ISAs

Alongside the Cash ISA changes, the Government has also announced measures designed to prevent investors using Stocks & Shares ISAs as a way of holding large cash balances.

From April 2027, proposals include:

A new 22% charge on interest earned from cash held within a Stocks & Shares ISA.
Restrictions on transferring money from a Stocks & Shares ISA back into a Cash ISA for those under 65.
Limits on holding portfolios made up entirely of cash-like investments, such as money market funds.

These changes are intended to encourage investment rather than using investment ISAs simply as tax-free savings accounts.

 

What is happening to the Lifetime ISA (LISA)?

Perhaps the biggest proposed change is to the Lifetime ISA.

The Government has launched a consultation on replacing the Lifetime ISA with a new First Time Buyer ISA.

While no final decisions have been made, the proposals include:

Removing the upper age limit for opening an account.
Continuing to offer a Government bonus towards buying a first home.
Paying the Government bonus when you purchase your property, rather than as contributions are made.
Removing the 25% early withdrawal penalty that has caught out many Lifetime ISA savers.
Focusing the new account solely on helping people buy their first home, rather than combining home ownership and retirement savings.

The existing Lifetime ISA is not disappearing overnight. Existing accounts will continue, and the Government is consulting on how any future transition would work.

 

Should you make any changes?

Not necessarily.

Although these announcements have generated plenty of headlines, many of the changes won't take effect until April 2027, while others remain subject to consultation and could still change.

Every individual's circumstances are different. Whether you are saving for retirement, investing for the future, helping children onto the property ladder or simply making the most of your annual ISA allowance, it's important to ensure your savings strategy remains appropriate for your goals.

 

We're here to help

Tax rules and allowances change regularly, and what is right for one person may not be right for another.

If you're unsure how these proposed ISA changes could affect you, or you'd like to review your savings and investments, we'd be happy to help you understand your options and ensure your plans remain on track.

 

Please contact our team to arrange a review.