HM Revenue and Customs has announced that from April 2027, under-65s will face a £12,000 annual cap on cash Isa deposits, while interest on cash held in stocks and shares Isas will be taxed at 22%. However, state pensioners aged 65 and over are exempt from these changes, meaning they can continue to deposit up to £20,000 a year in cash Isas without incurring tax on interest.
The government also launched a consultation on a new first-time buyer Isa, which will be available to anyone aged over 18 with no upper age limit, replacing the Lifetime Isa. The new Isa will offer a 25% government bonus paid only when a property is purchased, removing the annual bonus and the 25% penalty for early withdrawal.
Treasury officials stated that the changes recognise 'the age at which a first home is bought is rising'. The consultation will consider the £450,000 property price cap, which has remained unchanged since 2017 despite rising house prices.
Critics argue the reforms add complexity. Rachel Vahey of AJ Bell said: 'Rather than minimise friction between saving and investing, these reforms reduce flexibility, entrench the divide between cash and investment accounts and introduce tax charges and complex age-related allowances.'
