Budget 2026: Cash ISA limit to STAY at £20,000 for under-65s – as plans for 'starter investment ISA' announced
Plans to limit the amount under-65s can put into a cash ISA each year have been scrapped, the Chancellor John Healey has announced in the Budget (on Wednesday 28 October). Plus, the Government will consider a new incentive on stocks and shares ISAs for first-time investors – a concept MoneySavingExpert.com (MSE) founder Martin Lewis has argued for. Here's what we know.
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:
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".
The next day (Thursday 29 October), Martin put out a full explainer of how the 'starter investment ISA' could work in practice. See an excerpt of his response here:
We don't have much detail yet, but my suggestion was not for a new ISA. The ISA regime is already complicated. It was that first-time investors in a shares ISA should get a bonus on the money they put in.
This is something I first suggested to the former Chancellor Rachel Reeves (and repeated to the current Chancellor John Healey), when she was discussing reducing the cash ISA allowance "not to raise revenue but to get young people to invest". I thought it would be better to use a carrot rather than a stick.
As a totem, it would be a bonus of, say, 10% or 15% on the first £2,000 to £3,000 – though research needs doing on what the sweet spot is...
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 this week that these measures will NOT go ahead as planned.
MSE's Budget 2026 coverage
Check out all of our other MSE News stories following the Chancellor's announcements:
Full round-up of the key measures, including MoneySavingExpert.com (MSE) founder Martin Lewis' video analysis of what they mean for you.
Millions of households in Council Tax bands A-D will get a £100 payment next year to help with energy costs. Funding's also being allocated to Northern Ireland, Scotland and Wales for similar schemes.
The Lifetime ISA withdrawal fine has been axed for homes above £450,000 in a major MSE win. Plus, the launch of the First-Time Buyer ISA has now been confirmed.
Gas Standing Charges will FINALLY be scrapped in a move MSE has campaigned on for years. Watch Martin's instant reaction and analysis.
State Pensioners with incomes under £13,037 a year to pay NO Income Tax as new allowance introduced.
New 'Your First Home' homebuying scheme to launch in England. It was first announced in September and now more details have been revealed – we explain how the scheme will work.
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