Isa allowances frozen at £20k till 2030 and the British Isa formally scrapped within the Budget

Isa limits will remain frozen until 2030, Rachel Reeves announced in the Budget – and the British Isa idea has been officially killed off.

Annual Isa allowance limits will stay 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 saving and investing allowance has been in place since April 2017. 

Now, it will 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.

The Chancellor did not make any changes to Isas and scrapped the British Isa in the Budget

If the £20,000 tax-free allowance had risen each year in line with the consumer prices index measure of inflation since 2017, the annual allowance would now be roughly £26,000.

Savers and investors had been clinging to hope that the Chancellor would finally raise the £20,000 Isa allowance.

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

The rumoured lifetime cap of £500,000 also did not materialise in the Budget.

There will remain no limit on how much money savers can amass in an Isa in total, as long as they stick to their 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 retirement at the same time , with the Government offering a 25 per cent top-up on contributions, worth up to £32,000 if you max out your fund.

Your savings and the 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 retirement then a 25 per cent penalty applies. 

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: ‘This is a missed opportunity to make tweaks to the Lifetime Isa, including using the Lifetime framework to support self-employed people with their pension planning, cutting 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.’

Farewell to the British Isa… before it even took off

The Government also confirmed it will not proceed with the British Isa due to ‘mixed responses to the consultation launched in March 2024’.

The British Isa idea was launched by the former 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 slammed by industry experts for over-complicating an already confusing Isa market, as well as being ineffective in its aim of boosting the UK stockmarket. 

Coles said: ‘Providing certainty over allowances until 2030 provides very welcome stability to this cornerstone of people’s finances. Rumours before the announcement led investors to fear the worst, so they’ll be breathing a sigh of relief now.

‘The downside of this certainty is that over time, the allowance will continue to drop in real terms, and become less valuable. The £20,000 allowance was introduced back in 2017, and hasn’t moved since. 

‘Given the level of inflation we’ve seen since, this has eaten into the real value of the allowance.’