Key Takeaways
- The new UK government could restore the full ISA allowance, cap lifetime savings, or launch a ‘British ISA.’
- Changes to ISA savings allowances made by former chancellor Rachel Reeves are due to start in April 2027.
- Experts say Andy Burnham and John Healey have limited scope to announce sweeping changes to personal finances in the Autumn Budget.
The UK’s personal finance and taxation regime will be in the spotlight again in the Autumn Budget, which is due to be delivered by new chancellor John Healey on Oct. 28. While speculation has already started around pension changes and property tax increases, the 20 million savers and investors holding ISAs are also anxiously watching for new announcements.
The government is expected to clarify policies on savings amounts and potentially cap the value that can be held tax-free over an individual’s lifetime. More details are also expected on the first-time buyer ISA, a replacement for the lifetime ISA designed to incentivize home ownership.
ISA Changes in April 2027: What Savers Need to Know
Under new rules announced by the previous chancellor, Rachel Reeves, significant changes to ISAs are due in 2027. The key change is a reduction in the cash ISA allowance for those under age 65 from £20,000 to £12,000, a way of reducing dependence on cash savings. Additional rules will discourage savers from holding “cash-like” assets in stocks and shares ISAs.
After industry criticism that a reduced limit lowers incentives for saving, Healey could revisit this policy, scrap it, and restore the full ISA allowance for cash savings. Another option is a cap on overall ISA savings. Torsten Bell—who is now in the Andy Burnham government—promoted that idea when he was chief executive of the Resolution Foundation, a left-leaning think tank.
Michael Diamantopoulos, associate director of fixed income and currency at Morningstar, says such a cap would have a “material impact” on the UK’s savings regime. More than 5,000 individuals are “ISA millionaires,” according to the UK tax authorities, and they could be a tempting target for a government keen to raise revenue.
Key ISA Savings Changes at a Glance
- From April 2027, the limit for cash ISAs will drop to £12,000 for those aged 65 or younger, but the stocks and shares ISA will still allow £20,000 of investments.
- A 22% tax on income will apply on cash assets held within a stocks and shares ISA.
- Money market funds will be classed as “cash-like” holdings but not be taxed at this 22% rate as long as they don’t make up 100% of the total.
Could the British ISA Make a Comeback?
Originally planned to incentivize UK savers to put their money in UK markets, the British ISA was suggested by Conservative chancellor Jeremy Hunt but ditched by Labour after the party took office in 2024. The idea has resurfaced thanks to Andy Haldane, the Bank of England’s former chief economist and advisor to the new government.
“The predecessor to ISAs, personal equity plans, had an explicit bias toward investment in domestic companies. Calls for a ‘British ISA’ are in a similar spirit,” Haldane told the British Chamber of Commerce in June. “This is not about overly constraining investment choices. It is about correcting the [absence of] ‘home bias’ … As best we can tell, no one would be more supportive of such a shift than those whose money it is, households," he said.
How Many Tax Changes Can Burnham’s New Government Make?
Morningstar’s Diamantopoulos says that despite its ambitious plans for social reform, the government has limited room to maneuver, what with its pledges not to raise income taxes. “I doubt big changes are feasible, given Burnham’s commitment to the Labour Manifesto and him ruling out the abolition or modification of the [state pension] triple lock,” he says. “My reading of his announcements so far is they’re trying to achieve maximum political impact in terms of symbolism with the minimum fiscal cost possible. As long as this strategy works—and it does, according to the polls—I don’t expect him to take big risks.”
Tom McPhail, a former head of policy at Hargreaves Lansdown, is looking ahead to the Autumn Budget, when the new government has to justify its pledges with policies. “October is really where the rubber hits the road and we find out how much political capital Andy Burnham really has,” he says. “We’re hearing a lot about spending plans, so where’s the money coming from?”
