The move will reverse plans delivered during last year’s Budget by the then-Chancellor Rachel Reeves, who announced that the cash ISA limit would fall from £20,000 to £12,000 a year from April 2027 for under-65s. At the time, the Government said the cut, the first since 2017, was meant to encourage more people to invest in stocks and shares instead.
Martin Lewis: ‘Delighted the Chancellor has taken up my idea!’
Immediately following the announcement, Martin posted his reaction on X:
Martin Lewis
MSE founder & chair
Cash ISA cut SCRAPPED. The limit will stay at £20,000 tax-free for people of all ages. And to make investment more accessible I will work with the sector to form a new ‘starter ISA’ to make investment more accessible.
Delighted Chancellor has taken up my idea for this and gone with the carrot rather than the stick!
When plans to cut the cash ISA were first mooted ahead of the 2025 Budget announcement, Martin had pushed for an allowance for over-65s, saying that if a cut’s aim was to encourage young people to invest, “at the very least there should be a carve out for older savers whom aren’t the target”.
An ISA is simply a savings account where you never pay tax on the interest you earn. Currently, you can contribute up to £20,000 each tax year into a cash ISA (or you can split this allowance between other types of ISA, such as stocks and shares).
Plans for a ‘starter investment ISA’ announced
At the time that the cash ISA limit cut was being considered, Martin cautioned that he would prefer “a carrot, not stick approach” – for example, urging the Government to consider education and guidance, and suggesting it launch a “starter investment ISA”.
In the Budget on Wednesday 28 October, the Chancellor confirmed that the Government would “work with industry to explore a new ISA incentive for people investing in a stocks and shares ISA for the first time”. We’ve asked for further details and we’ll update this story when we know more.
Here’s what Martin previously set out in full detail:
Martin Lewis
MSE founder & chair
The thought behind cutting the cash ISA allowance is to encourage, especially younger people, to invest via stocks and shares ISAs (which, in the long run, is likely to be better for them and the economy).
I think it’s unlikely to work. If people want savings, they want savings. It’s also unfair to deny older people, who have to be more risk averse, when trying to nudge younger people. As the Government has repeatedly said, none of this is about raising revenue. I’ve suggested an alternative concept…
Launch a new ‘starter investment ISA’. You can put, say, up to £1,000 in (whether lump sum or dripped in monthly) and, as well as it being tax-free, you’ll get, for example, a 5% boost on contributions from the state (with the cost split between investment providers and the state) as long as the money is kept in investments for a set time (for example, one year).
This is a sweetener to encourage people who’ve never invested to dip their toe in the water. Part of the issue is lack of education and guidance about risk or reward and investing, so doing this would enable it to be more talked about, and let people take the plunge with less risk (some risk is offset by the 5%).
It would be set up so you could use the same account to invest in a standard investment ISA too. So people can seamlessly add more funds to it (no bonus over the first £1,000 though).
It could be capped at a set age (probably 40, like Lifetime ISAs) if it needed to be targeted. Don’t worry about the numbers or exact rules, it’s a conceptual suggestion. Thoughts welcome.
Investment ISA circumvention rules have ALSO been scrapped
In June 2026, the former Government also laid out a series of planned changes designed to stop people using investment ISAs as a workaround to hold cash. These included a 22% charge on interest earned from cash held in stocks and shares ISA, and a ban on transfers from non-cash ISAs to cash ISAs for under-65s.
However, the Government has confirmed today that these measures will NOT go ahead as planned.
More to follow…