ISAs are one of the government’s favourite things to tinker with, and the 2026 Budget was no different.
All the changes back and forth don’t make keeping up with the best saving strategies very easy. So, here is what’s happening with each of the existing ISAs, and the new ones on the docket. If you don’t want to dredge through the details, this table also outlines the main facts to know.
Cash ISA rule rollback
After quite a bit of back and forth, rules around Cash ISAs will stay the same as they are now. The government had previously proposed cutting back the amount that can be put into Cash ISAs annually to from £20,000 to £12,000, beginning in the 2027/28 tax year. That is now no longer happening, so you can proceed as you typically would with your cash ISA. Brits will still have a £20,000 allowance that they can split across their ISAs however they choose, save the lower limits on Junior ISAs and Lifetime ISAs.
Stocks and shares ISA rule rollback
Stocks and shares ISAs are staying in their current form as well. When the Cash ISA limits were set to come in place, there were proposed rules for Stocks and shares ISAs that would mean paying a charge on any cash interest made in the ISA. But, because the Cash ISA rules were reversed, these rules have been reversed as well. You can hold whatever portion of your £20,000 ISA allowance in a Stocks and shares ISA you please.
Lifetime ISA penalty changes
Lifetime ISAs are being phased out by the government and replaced by the First-time buyer ISA in April 2029. Until then, you can still open a Lifetime ISA and enjoy the government bonus paid in when you pay in, and if you already hold a Lifetime ISA by the April 2029 switch date, you can continue to benefit from that vehicle. The maximum amount to put in each tax year is £4,000, topped up by 25% by the government for a maximum of £1,000. You can open a Lifetime ISA up until age 40 and put money in up until age 50.
The withdrawal penalty rules around for Lifetime ISAs changed as of midnight 29 October 2026. Lifetime ISAs can be used either to purchase a home with a value of £450,000 or funds can be withdrawn age 60 and over. The penalty for withdrawing money from an ISA under circumstances other than this was a 25% fee, meaning that savers may get less than they put in.
This rule has been changed so that now, if the money is still used to buy a first home but the value of that first home is over £450,000, the penalty is 20% instead. This effectively recoups the bonus paid in by the government, but doesn’t eat into what the saver put in. If you use the money for a purpose outside of a house purchase before age 60, you still face the 25% fee. This new rule is already in effect.
New ISA: First Time Buyer ISA
The government has started to provide more information on the First-time buyer ISA, but Brits still have over two years until this new structure comes into play, so there’s always possibility for more tinkering. The new ISA will serve primarily as a vehicle to assist in first-time home purchases, with less focus on retirement than the Lifetime ISA. Those that would like the benefits for retirement that come with the Lifetime ISA would probably be better off opening one now, even with just a few pounds.
Unlike the Lifetime ISA, the First-time Buyer ISA will have no upper age limit, but it will still have a maximum property value of £450,000. Instead of the government making their own contributions as you put money in, like the Lifetime ISA, they will make a 25% contribution to the end balance, up to £20,000. This effectively works out as the same benefit for home buyers as the Lifetime ISA, unless your investment had done extremely well and the 25% contribution would have exceeded that £20,000 cap. Investors will only be able to hold one First-time buyer ISA at a time, and won’t be able to transfer money from their Lifetime ISA into their First-time Buyer ISA.
Possible New ISA: Starter ISA
During the Budget, chancellor John Healey mentioned the advent of the ‘Starter ISA’ which would have some sort of incentive for first time investors. In the full document detailing changes following the Budget from HM Treasury, there was no specific mention of a ‘Starter ISA’, but it did mention plans for incentives for first-time investors. We don’t have the details yet of what these incentives would be, and if they will require a new ISA product or not.
No changes: Junior ISAs
There were no changes to Junior ISAs this time around. Anyone can put money into a child’s Junior ISA, and they have a yearly subscription limit of £9,000. The child cannot take money out of their Junior ISA until age 18, but then that money is theirs to do as they please. Previous research by AJ Bell has shown that most children opt to continue saving most of the money. They can also take over in making investment decisions for the Junior ISA at age 16. While this might seem a bit scary, it also means that children are learning how to invest before entering the world as an adult, which can be a big leg up.
Hannah Williford: Investment Writer
Hannah joined AJ Bell in 2025 as an investment writer. She was previously a journalist at Portfolio Adviser Magazine, reporting on multi-asset, fixed income and equity funds, as well as macroeconomic impacts and regulatory changes...