DWP state pensioners are not affected by the HMRC change
State pensioners born before 1962 exempt from new savings rule
State pensioners are exempt from incoming cash ISA rule changes. The amount of money that can be saved tax-free in cash Individual Savings Accounts (Isas) will be cut from £20,000 to £12,000 a year for under 65s, Labour Party Chancellor Rachel Reeves announced in the Budget.
The current £20,000 annual allowance can be used in one account or spread across multiple Isa products as you wish.
These accounts do not close automatically at the end of the tax year. When the next tax year begins, you can open a new Isa or – in some cases – can keep adding money to your existing accounts.
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You have to be 18 to open an Isa. You also have to live in the UK or be a member of the armed forces, or a so-called Crown servant who works abroad.
In the Budget, the chancellor said the annual tax-free allowance for cash Isas will be reduced from £20,000 to £12,000 for people under the age of 65.
The change will be introduced in April 2027. It means anyone born before 1962 is exempt. The government wants to “ensure people’s hard-earned savings are delivering the best returns and driving more investment into the UK economy”.
BBC and ITV star Martin Lewis said: “There’s logic in here based on the policy aims. While I would’ve preferred a carrot, not stick approach – this isn’t as bad as it could’ve been, £12,000 per year is still a reasonable whack for many people.
“The stated aim was not to raise revenue, but to encourage young people to invest rather than save – both for the economy, but also because on average it outperforms.
“When I met the Chancellor on this a few weeks ago, I pointed out that a blanket cut to the limit would be perverse; to cut cash ISA limits for older people to encourage younger people to invest wouldn’t work.
“So, the carve out for over-64s makes total sense and I’m pleased she listened.
“What needs to happen along with this is better investment education, easier access to guidance, and better investment incentives for young people.”