ISA news has been all over the place lately. If you have money in a cash ISA or are looking to open one, you’ll want to read this. The government is proposing changes that will affect millions of savers from April 2027. And yeah, it’s a little complicated.
Here’s what’s actually going on. Chancellor Rachel Reeves announced in November’s Budget that the cash ISA limit is dropping from £20,000 to £12,000 yearly. But only if you’re under 65. If you’re 65 or over, you can still save the full £20,000 in cash ISAs. Everyone else? You’ll get £12,000 max cash saver at best, with the other £8,000 having to be put in stocks and shares ISAs, should you wish to use your full allowance.
The overall ISA limit stays at £20,000. They’re not cutting that. They’re just forcing younger savers to invest more if they want to maximise their tax-free savings. The government reckons this’ll boost investment in the UK economy. Whether it actually will is another question entirely.
Why This Matters
ISA news UK matters because ISAs are brilliant for savers. Any interest you earn inside an ISA is completely tax-free. No questions asked. That’s huge when rates are decent.
Right now, you can get about 4.5% on easy-access cash ISAs. Trading 212 is paying 4.52%. Bank of Ireland UK is offering 4.11%. Those are proper rates. And every penny of interest is yours to keep.
Without an ISA, you’ve got the Personal Savings Allowance. That’s £1,000 tax-free interest for basic rate taxpayers, £500 for higher rate, and zilch for additional rate. Once you’re above that, HMRC takes a cut. With interest rates where they are now, you only need about £20,000 in savings to hit that £1,000 limit. So ISAs actually matter again.
Also Read – Rachel Reeves and the Tax Mess Nobody’s Talking About
Changes to ISA Rules 2026
The Treasury announced this week that more would be revealed about the new rules in 2026. They are still working out the details. What if you turn 65 in the middle of a tax year? Can you jump to the full £20,000 allowance straight away? Nobody knows yet.
What we do know is that the changes take effect from April 2027. So you’ve got the whole of the 2025/26 tax year to use the current £20,000 cash ISA limit if you want. After that, it drops to £12,000 for most people.
Existing savings aren’t affected. If you’ve already got £50,000 sitting in cash ISAs from previous years, that money stays put. The limit only applies to new contributions from April 2027 onwards.
What Martin Lewis’ Best ISA Rates Are Saying
Money expert Martin Lewis has been all over this on MoneySavingExpert. He pushed hard for the over-65s exemption, which the government eventually included. Small win there.
For Martin Lewis’ best ISA rates right now, his site recommends Trading 212 at 4.52% for easy access. If you want a fixed rate, Tembo via Investec is paying 4.3% for one year. Charter Savings Bank offers 4.2% for two years.
Those rates will drop, though. The Bank of England’s been cutting the base rate. It’s at 4.75% now, down from 5%. Banks always follow suit. So if you’re thinking about locking in a fixed-rate ISA, sooner is better than later.
Current ISA Rates Across the Market
ISA rates vary depending on what type you want. Easy access ISAs let you withdraw anytime. Fixed-rate ISAs lock your money away for one, two, or even five years. Notice ISAs require you to give a warning before withdrawing, usually 30 to 95 days.
Easy access rates are around 4% to 4.5% right now. Fixed rates are slightly lower, counterintuitively. That’s because banks reckon rates will keep falling, so they’re not offering much premium for locking money away.
Stocks and shares ISAs are entirely different. You’re investing in the market, not just saving. Returns can be much higher over time, but you risk losing money too. That’s why the government pushing people toward them is controversial. Not everyone’s comfortable with that risk.
The FSCS Protection Change
Here’s something good in the ISA news UK: the Financial Services Compensation Scheme limit increased on December 1st. It went from £85,000 to £120,000 per person, per institution.
That means if your bank goes bust, you’re protected up to £120,000 now instead of £85,000. For joint accounts, it’s £240,000. That’s proper reassuring if you’ve got significant savings.
Just watch out for banks that share licences. Some brands are owned by the same parent company, so the limit’s shared between them. Check before you spread your money around.
BBC News ISA Changes and Media Coverage
BBC News’ ISA changes coverage has been pretty intense. The announcement caused a right stir. Building societies weren’t happy. They warned that cutting cash ISA limits could affect mortgage lending because they use ISA deposits to fund loans.
The Investment Association pushed back too when the government first floated even harsher cuts. Early rumours suggested dropping the limit to £4,000 or £10,000. Public outcry was massive. The £12,000 compromise was meant to soften the blow.
Martin Lewis called it “piss people off economics” rather than nudge economics. He’s got a point. You can’t force people to invest by limiting their savings options. Many savers aren’t comfortable with market risk, and that’s perfectly reasonable.
Also Read – What the UK Economy Really Looks Like
What You Should Actually Do
First, use your 2025/26 allowance if you can. You’ve got until April 5th, 2026, to save up to £20,000 in cash ISAs under current rules. After that, the £12,000 limit kicks in for under-65s.
Second, check your current ISA rate. Loads of people have money sitting in ISAs paying 1% or less because they opened them years ago and never switched. You can transfer ISAs to better rates without losing your tax-free status. Don’t just withdraw and redeposit, though. That uses your current year’s allowance. Proper ISA transfers don’t.
Third, think about whether stocks and shares ISAs make sense for you. If you’re young with decades before retirement, investing might work. Markets go up over long periods, historically. But if you need that money in the next five years, cash is safer.
The Bigger Picture
The government wants more retail investment in UK stocks. They reckon Brits hold too much in cash and not enough in equities. Fair enough. But reducing choice isn’t the way to achieve that.
Better financial education would help. So would making investing less intimidating. The FCA’s working on “targeted support” to boost confidence. Major providers like Hargreaves Lansdown, HSBC, Lloyds, and Barclays have signed up to create online hubs to help people navigate investing.
Whether any of this actually works remains to be seen. Forcing younger savers to invest £8,000 if they want their full tax-free allowance might just annoy people. Or it might genuinely shift behaviour toward investing. We’ll find out in April 2027.
For now, ISA news is basically this: use your current allowance whilst you can, find the best rates available, and start thinking about whether investing makes sense for your situation. The landscape’s changing whether we like it or not.
