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Chancellor Rachel Reeves has unveiled sweeping reforms to the ISA system in the Autumn Budget. The headline change is a reduction in the cash ISA tax-free allowance to £12,000 for those under 65, effective 6 April 2027. While the overall ISA limit remains at £20,000, the government has mandated that to use the further £8,000 allowance, those under 65 must invest funds through a stocks and shares ISA, a move designed to encourage greater investment in UK companies and reduce reliance on cash savings.
For over-65s, the current £20,000 cash ISA allowance will remain untouched, a concession aimed at protecting retirees who later in life should not be expected to risk their capital to secure tax advantages.
This marks the first major adjustment to ISA limits since 2017, when then-Chancellor Philip Hammond raised the allowance from £15,000 to £20,000. The new policy reflects the government's broader ambition to stimulate economic growth by boosting domestic investment.
In short, the Autumn Budget's ISA reforms represent a significant shift in savings policy, balancing the protection of pensioners with a push to redirect younger savers toward investment markets. Whether this will succeed in changing saving habits remains to be seen.
There has also been no mention of the link with Lifetime ISAs that younger savers may already be utilising.
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