The long-rumoured cut to the Cash ISA allowance has been confirmed. From April 2027, it will be just £12,000 for savers under the age of 65.
Tucked away in the small print, the government also announced a consultation early next year to replace the Lifetime ISA (LISA) with an ISA product to support first time buyers.
But what do these changes mean for anyone using these ISAs?
This article isn’t personal advice. ISA, and tax rules can change at any time, and any benefits depend on your circumstances. If you’re not sure if an action is right for you, ask for financial advice.
Cash ISA allowance cut confirmed
An investment culture is needed in the UK, and some of the money that has been saved in Cash ISAs would work harder for people if it was invested instead. But there’s no evidence that cutting the Cash ISA allowance would encourage them to make the change to Stocks and Shares ISAs.
There will be people for whom Cash ISAs are the most sensible home for their money, especially if they’re saving for the short term, have significant sums of cash and are a higher earner. There will also be those who should be investing instead, but there are already positive changes in the pipeline to encourage this. One is allowing businesses to provide more targeted support and give people the help they need to take advantage of the enormous growth potential of investment.
Savings can act as a gateway to investing too. The current system makes this straightforward, because there’s flexibility over transfers, so it’s easy to move from cash to stocks and shares and back again. However, the government is consulting on rule changes that include preventing transfers from Stocks and Shares ISAs to Cash ISAs under the age of 65.
HL will be contributing to the consultation, but it’s important the ISA regime retains as much simplicity with as few barriers as possible. People are reluctant to invest partially due to a lack of confidence and awareness, and adding complexity could worsen that trend. Engaging with the Treasury and HMRC on the details could make sure things are as simple as possible for clients.
What can you do?
The change is coming into force in April 2027, so the ISA allowance of £20,000 is still in place. If you’re looking to use your allowance to save or to derisk your portfolio, now is the time to plan it. Ahead of the Budget, there was a rush of cash into HL’s savings products, with over £1bn added to the Active Savings platform in October-November.
If you’re looking for great Cash ISA rates, there are still lots of deals over 4%, above the latest inflation rate of 3.6%.
But it’s worth shopping around to try and get the best rates you can for the level of access you need.
Here’s where the HL Cash ISA can help.
You can manage your Cash ISA portfolio with more than 10 banks all on a single online platform – so you can see everything in one place.
It also lets you spread your money across fixed-rate, easy-access, and limited-access products.
You can then manage it alongside your savings and investment accounts, all through one log in.
HL has also launched our own easy-access Cash ISA rate powered by Shawbrook.
All savings products in the HL Cash ISA benefit from FSCS protection. The Financial Services Compensation Scheme covers up to £120,000 per banking licence.
Just remember, products in the HL Cash ISA can be added or withdrawn at any time.
LISA reform on the table
Details are scant ahead of a consultation in 2026 on a new ISA for first-time buyers.
Currently, you can use a LISA to buy your first home or your retirement. You can open a LISA between the ages of 18 and 39 and pay in up to £4,000 every tax year until you’re 50, as part of your overall £20,000 ISA allowance.
It’s provided an helpful boost for hard-pressed young buyers to get onto the property ladder. And it’s also proved a valuable way for people to save for later life, especially self-employed people, who often fall seriously short when it comes to pension contributions.
The right consultation on its replacement is vital, and needs to ensure that dedicated savers and investors, who as a group have been putting money away for their first property or for retirement aren’t disadvantaged by any change. HL will explore the best way to manage these pots as we engage with the government on their planned changes.
What can you do?
The consultation isn’t due to be introduced until 2026, so the LISA remains as it is for now. If you currently have a Lifetime ISA, and plan to use it to buy a first property soon, don’t worry, they’re operating as usual. If you’re using it to save for later life or for a property further down the line, you will need to watch this space for more details on how the change will affect you.
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