Upcoming changes are set to impact ISAs and various savings accounts. An ISA is a savings account where interest is tax-free. However, starting in April 2027, regulations are becoming more intricate. The cash ISA limit will decrease for younger savers, alongside a new charge on cash within stocks and shares ISAs. Additionally, the tax rate on savings interest outside of ISAs will rise. By April 2028, a new First Time Buyer ISA will replace the Lifetime ISA. The annual cash ISA limit will drop from £20,000 to £12,000 for individuals under 65 from April 2027. Despite this cut, the overall ISA limit will remain at £20,000, allowing savers to split their investments between different types of ISAs. Individuals over 65 can still save up to £20,000 annually in a cash ISA.

To prevent circumvention of the new cash ISA limit, a 22% levy will apply to interest earned from cash in stocks and shares ISAs starting April 2027. Moreover, savers cannot hold their entire non-cash ISA portfolio in Money Market Funds. Transferring funds from a non-cash ISA to a cash ISA and vice versa will also be restricted. The forthcoming First Time Buyer ISA, launching in April 2028, is designed to assist first-time homebuyers with a bonus incentive akin to the existing Lifetime ISA. While specifics of the bonus remain undisclosed, the Lifetime ISA allows savings for home purchases or retirement, accessible upon turning 60. Conversely, the First Time Buyer ISA will solely serve homebuying purposes.

For non-ISA savings, taxes apply to interest exceeding a certain threshold annually. Basic-rate taxpayers can earn up to £1,000 in savings interest tax-free, with a 20% tax rate thereafter. Higher-rate taxpayers currently pay 40% tax on interest exceeding £500, set to increase to 42%. Additional rate taxpayers face a 45% tax on all savings interest, escalating to 47%.