Major changes to savings allowances are coming in from next year
The Government has provided an update regarding changes to savings rules. This comes as major changes to ISA allowances are set to take effect from next year. Ministers have now spoken about bringing in further changes to ISA rules.
Labour MP Gill Furniss asked the Government in a written question whether there are plans “to increase the purchase limit for properties outside of London when using a Help to Buy ISA”. Under current regulations, you can only use Help to Buy ISA funds towards purchasing a property valued up to £250,000 outside London, or up to £450,000 within the capital.
ISA holders can contribute up to £200 monthly into the account, or £2,400 annually, with the Government then supplementing your savings with a 25 percent bonus, adding up to £3,000 in bonuses when you purchase your first home. These ISAs can no longer be opened, though you can save towards your first property using a Lifetime ISA.
Responding to the question, Treasury minister Lucy Rigby said: “This Government is committed to helping first time buyers own their own home and will do this by building 1.5 million more homes. The Government keeps savings policy under review, any changes of this kind would be made at a relevant fiscal event.”
The Government announced some significant changes to ISAs at the Autumn Budget 2025. Ministers revealed the current £20,000 annual ISA allowance would be restricted.
Under the new rules, you will only be able to use up to £12,000 of this allowance for deposits as you decide between different accounts. The remaining £8,000 will only be available for investment-based ISAs, meaning you won’t be able to deposit it into cash ISAs.
However, people aged 65 and above will be exempt from these new regulations. Those saving towards their first property might consider opening a Lifetime ISA.
With this account, you can contribute up to £4,000 each tax year, and the Government will provide a 25 per cent bonus on any deposits, up to £1,000 annually. The bonus is credited immediately following your deposit.
There’s also a property ceiling to note here, as you can only use the funds to purchase your first home if it’s valued at £450,000 or below. Only people aged between 18 and 39 are eligible to open a Lifetime ISA.
You can only make contributions to the account until you reach 50. The funds can also be used for your retirement, as you can access the money when you turn 60.
Account holders face a 25 percent withdrawal penalty if you withdraw any funds for reasons other than purchasing your first home or when you reach 60.
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