The cash ISA cut that will not happen, and the new First Time Buyer ISA

From 6 April 2027, savers under 65 were due to be limited to £12,000 a year in cash ISAs, within the overall £20,000 allowance. HMRC had published the regulations in September. Budget 2026 reverses the decision: the cash ISA limit stays at £20,000.

It matters more because tax on savings interest outside ISAs rises to 24%, 44% and 49% from April 2027. A higher-rate saver earning £2,000 of interest a year outside an ISA, with a £500 allowance, will pay £660 rather than £600.

A new ISA for first homes

From April 2029, the First Time Buyer ISA replaces the Lifetime ISA for new savers. It keeps the £4,000 annual limit and 25% government bonus, paid when the money is used to buy a first home worth up to £450,000, with the bonus capped at £20,000. Existing Lifetime ISA holders can keep saving under the current rules.

From 29 October 2026, Lifetime ISA holders buying a first home above the £450,000 cap pay a reduced withdrawal charge of 20%, so they no longer lose part of their own savings. Other unauthorised withdrawals still carry the 25% charge.

Using this year’s allowance

• The ISA allowance resets on 6 April and cannot be carried forward.
• You can split £20,000 across cash, stocks and shares, innovative finance and Lifetime ISAs.
• A flexible ISA lets you replace money you take out in the same tax year.