Reeves confirms changes to UK ISAs
Chancellor Rachel Reeves has confirmed that she will be making changes to the UK’s ISA system from 2027.
An ISA is a type of savings account that lets you save or invest your money without paying income tax or capital gains tax on any returns.
In any tax year you can invest up to £20,000 in your ISA. You can divide your annual allowance across different types of ISAs, but you cannot go over the £20,000 a year limit:
- Cash ISA
- Stocks and shares ISAs
- Innovative finance ISAs
- Lifetime ISAs
Presenting her Budget in parliament on Wednesday (26 November), the Chancellor said that she plans to keep the £20,000 ISA allowance – but designate £8,000 of that for an ISA with stocks and shares. This effectively limits Cash ISAs to annual investments of £12,000.
“From April 2027, I will reform our Isa system, keeping the full £20,000 allowance while designating £8,000 of it exclusively for investment, with over-65s retaining the full cash allowance,” she said.
“And thanks to our changes to financial advice and guidance, banks will be able to guide savers to better choices for their hard-earned money. Over 50% of the ISA market – including Hargreaves Lansdown, HSBC, Lloyds, Vanguard and Barclays – have signed up to launch new online hubs to help people invest here in Britain.”
While the move will be welcomed by some as a way to get more people actively investing in UK companies, others have criticised the Chancellor for making the system too complicated.
In a report published on Wednesday (10 September), the Treasury Committee said it was unconvinced that the LISA effectively targets people in genuine need of financial support. However, the Government has not taken this opportunity to set out a plan for reform, MPs said.
In addition, MPs called for LISA savings to be treated in the same way as other pension savings in relation to the Universal Credit means test.
In the absence of such reform, the Committee argued that LISAs should be labelled as an inferior product and include warnings that they may disadvantage anyone who might one day claim Universal Credit.
