The Autumn Budget 2025 has brought in a set of changes to Individual Savings Accounts (ISAs) that will reshape how savers can put money away on a tax-efficient basis in the coming years.

Although the Government has maintained the overall annual ISA subscription limit at £20,000, the proportion that can be allocated to cash savings will be altered from April 2027 onwards. 

For many households, this represents a meaningful adjustment to how ISAs can be used, prompting fresh discussions about the trade-off between preserving capital and seeking investment growth.

New Cap on Cash ISAs

A key element of the reforms is the introduction of a cash ISA contribution limit for those aged under 65. From 6 April 2027, individuals below this age will be able to place a maximum of £12,000 per tax year into a cash ISA.

The remainder of the £20,000 annual ISA allowance can be allocated to other ISA types, including Stocks and Shares ISAs and Innovative Finance ISAs.

What is a Stocks and Shares ISA?

A Stocks and Shares ISA allows individuals to invest their money rather than hold it purely as cash. Within this type of ISA, savers can choose from a wide range of investment options, such as funds, individual shares, bonds and exchange-traded products. Any returns, including dividends, interest and capital gains, are free from UK income tax and capital gains tax. 

However, unlike a cash ISA, the value of investments can fall as well as rise, and returns are not guaranteed. This makes it a long-term option more suited to those comfortable with investment risk and looking for potential growth over time.

What is an Innovative Finance ISA (IFISA)?

An Innovative Finance ISA (IFISA) is designed for those who wish to access peer-to-peer lending or similar debt-based investment opportunities within a tax-efficient wrapper. Through an IFISA, individuals can lend money to approved borrowers or investment platforms and receive interest in return, with any interest earned remaining tax-free. 

As these products involve lending directly to individuals or businesses, they typically carry a higher level of risk compared with traditional savings or some mainstream investment funds. Capital is not guaranteed, and repayment depends on the performance of the borrower or lending platform.

ISA Limits for Over 65s

In contrast to the restrictions introduced for younger savers, individuals aged 65 and over will retain the option to place up to the full £20,000 annual allowance into a cash ISA. This approach acknowledges that many older savers place greater value on security, capital preservation and predictable returns.

Other ISA Limits Remain Stable

While the cash ISA rules are being tightened for under-65s, the Government has confirmed that other current ISA thresholds will remain in place for the foreseeable future:

• The Lifetime ISA annual limit will stay at £4,000.
• Junior ISAs and Child Trust Funds will continue with a £9,000 limit.
• The overall ISA subscription limit of £20,000 will be frozen until at least April 2031. 

These unchanged limits offer a degree of planning certainty for savers, families and long-term strategists. 

Encouraging Broader Investment Engagement

The overarching intention behind the Government’s ISA reforms is to encourage greater participation in broader investment markets. By restricting the cash ISA allowance for younger savers, policy makers hope to nudge a portion of savings towards stocks and shares ISAs, which have historically offered the potential for higher returns over extended periods, albeit with investment risk. 

Alongside ISA changes, the Chancellor also announced plans to consult on a new, simpler tax-advantaged savings product aimed at first-time buyers in the housing market. This proposed product, still in the consultation stage, is expected to succeed the current Lifetime ISA once finalised. 

How the Reforms Will Work in Practice

For savers across the UK, the practical impact is straightforward. The annual tax-free ISA allowance remains £20,000, but from April 2027 under-65s will see the maximum annual cash ISA contribution limited to £12,000.

Existing cash ISA balances are unaffected, only new contributions made after the rules come into force are subject to the cap. 

Importantly, the core advantages of ISAs continue to apply. Interest, dividends and capital gains earned within an ISA remain exempt from UK income tax and capital gains tax, reinforcing ISAs as a key vehicle for accumulating savings and investments over time. 

Help to Save and Other Schemes

Beyond ISA reforms, the 2025 Budget confirmed the Help to Save scheme will be made permanent. From 6 April 2028, eligibility will be broadened to include a wider set of Universal Credit claimants, helping lower-income households build financial resilience.

While the Government has stated an intention to expand the scheme further in future, no definitive timetable for those changes has yet been set. 

Different Savers, Different Effects

The ISA changes will influence savers differently depending on their age, financial goals and risk tolerance:

• Short-term savers who rely heavily on cash ISAs for emergency funds may want to carefully consider how they allocate their annual allowance between cash and other ISA types.
• Long-term savers might find a portion of their allowance more effectively used in stocks and shares ISAs, balancing potential growth against volatility.
• Older savers benefit from retaining the full £20,000 cash ISA entitlement and therefore face minimal disruption from the reforms. 

Planning Ahead

As the new rules will not take effect until April 2027, savers have time to review their current strategies. Steps worth considering include:

• Assessing how you use your existing ISA allowances.
• Considering whether some savings might be more suitable in investment-focused ISAs.
• Reviewing provider terms on holding cash versus investments within ISAs.

ISA providers are expected to update their products in response to the reforms, and further guidance will be released as consultations progress. 

Mark Cornes, Mortgage Broker and Financial Adviser in Bristol said:

“These ISA reforms highlight just how important it is for people to take a step back and review how they’re using their allowances. With limits changing for different age groups and a greater emphasis on long-term investing, it’s vital that savers understand the options available to them. Speaking to a regulated financial adviser can help ensure your approach remains aligned with your goals, your timeframes and your attitude to risk.” 

Why Professional Financial Advice Matters

Given the complexity of ISA rules and the importance of aligning savings with personal circumstances and risk appetite, consulting a regulated financial adviser remains valuable. 

An adviser can help you:

• Understand the benefits and risks of different ISA types.
• Evaluate how the new rules might affect your plans.
• Ensure your strategy reflects your goals, whether saving for a home, preserving capital or seeking growth.

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An ISA is a medium to long term investment, which aims to increase the value of the money you invest for growth or income or both. The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Note: This article is for general information only and does not constitute personal financial advice. Individual circumstances vary, and factors such as tax position, investment objectives and risk appetite are all relevant. For the most up-to-date detail, refer to the Government’s official Budget documents and guidance.

Thomas Oliver UK LLP is an appointed representative of The Openwork Partnership, a trading style of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.

Approved by The Openwork Partnership on 16/12/2025.

Sources: https://www.gov.uk/government/publications/budget-2025-document, https://www.gov.uk/government/publications/tax-free-savings-newsletter-19, https://www.moneysavingexpert.com/news/2025/11/cash-isa-limit-cut-martin-lewis-budget