Isa subsidies frozen at £20,000 until 2030 and UK Isa officially removed from budget

Isa limits will remain frozen until 2030, Rachel Reeves announced in the budget, and the British Isa idea has officially been scrapped.

Annual Isa allowance limits will remain frozen at £20,000 for Cash Isas and Stocks and Shares Isas, £4,000 for Lifetime Isas and £9,000 for Junior Isas until 5 April 2030.

The £20,000 tax-free Isa savings and investment allowance has been in place since April 2017.

It will now be frozen at its current level for a further six years, meaning it will have been frozen at £20,000 for 13 years by 2030.

If the tax-free allowance of £20,000 had increased each year in line with the Consumer Price Index inflation measure since 2017, the annual allowance would now be approximately £26,000.

Savers and investors had clung to the hope that the Chancellor would finally increase the £20,000 Isa allowance.

However, they will also breathe a sigh of relief that the allocation has not been cut in a bid to raise money to fill a £22 billion black hole in the country’s finances.

The rumored £500,000 lifetime limit also failed to materialize in the budget.

There will be no limit on the amount of money savers can accumulate in total in an Isa, as long as they stick to its annual limit of £20,000 a year.

Lifetime Isas were launched in April 2017 with an annual limit of £4,000, which is included in the overall £20,000 Isa limit.

These deals allow under-40s to save for a home and their retirement at the same time, with the Government offering a 25 per cent match on contributions, worth up to £32,000 if you max out your fund.

Your savings and bonus can be used towards a deposit on a first home worth up to £450,000.

If you withdraw money from a Lifetime Isa for any reason other than buying a first home or retiring, a 25 per cent penalty applies.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “This is a missed opportunity to make adjustments to the Lifetime Isa, including using the Lifetime framework to help the self-employed with their pension planning, reducing the Lifetime Isa penalty. from 25 per cent to 20 per cent and raising the maximum age to pay into a lifetime Isa to 55.’

Goodbye to the British Isa… before even taking off

The Government also confirmed it will not proceed with the UK Isa due to “mixed responses to the consultation launched in March 2024”.

The British Isa idea was launched by the previous Conservative government in March this year.

It would have allowed savers to invest an additional £5,000 a year tax-free in UK assets, on top of the existing £20,000 allowance.

It had been criticized by industry experts for overcomplicating an already confusing Isa market, as well as being ineffective in its aim of boosting the UK stock market.

Coles said: “Providing certainty over allocations until 2030 provides much welcome stability to this cornerstone of people’s finances.” Rumors prior to the announcement made investors fear the worst, so they will now breathe a sigh of relief.

‘The downside to this certainty is that over time, the allocation will continue to decline in real terms and become less valuable. The £20,000 allowance was introduced in 2017 and has not changed since.

“Given the level of inflation we have seen since then, this has affected the real value of the allocation.”