Budget keeps £20,000 cash ISA limit as savings tax rises from April 2027

Verified facts

The government will retain the annual cash ISA subscription limit at £20,000, reversing the planned reduction. Its Budget document also sets out a further two-percentage-point increase in savings-income tax rates from 6 April 2027, taking the basic, higher and additional savings rates to 24%, 44% and 49%. These are savings-income rates, not changes to the headline rates on wages. The changes are to be legislated for in Finance Bill 2026-27.

For eligible first-time buyers using a Lifetime ISA to purchase a home above £450,000, HMRC says the withdrawal charge will fall from 25% to 20% for relevant withdrawals made on or after 29 October 2026. Other unauthorised withdrawals retain the 25% charge. The Budget also proposes work with industry on a first-time stocks-and-shares ISA incentive; its detailed design is not yet settled.

Apolifina analysis

The cash ISA decision and the tax change need to be read together. A maintained subscription limit does not fix the interest rate offered by a provider. Outside a tax wrapper, the relevant comparison is the return after any tax actually due, not the advertised gross rate alone. Whether a saver owes tax depends on their circumstances and applicable allowances. The targeted Lifetime ISA change is not permission to withdraw for any purpose at the lower rate. In a simplified example with no investment growth or loss, £4,000 of contributions plus a £1,000 bonus makes £5,000. A 20% charge removes £1,000, leaving the original £4,000; it does not let the buyer retain the bonus. Conveyancing and provider requirements still matter.

Uncertainty and risk

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