The Government has issued an update about a change to the rules around ISAs. Major changes to ISA allowances are coming in from next year. Ministers have now discussed making further changes to ISA rules.
Labour MP Gill Furniss asked the Government in a written question if there are any plans “to increase the purchase limit for properties outside of London when using a Help to Buy ISA”. Under the current rules, you can only used Help to Buy ISA funds towards the purchase price of a property up to £250,000 outside London, or up to £450,000 inside the capital.
ISA holders can pay in up to £200 a month into the account, or £2,400 a year, and the Government then tops up your savings by 25 percent, adding up to £3,000 in bonuses, when you buy your first home. You can no longer open one of these ISAs, although you can save towards your first property with 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 did announce some key changes to ISAs at the Autumn Budget 2025. Ministers announced the current £20,000 a year ISA allowance would be restricted. Under the new rules, you will only be able to use up to £12,000 of this allowance as you decide.
The remaining £8,000 will only be available to go into investment-based ISAs, so you won’t be able to put it in cash ISAs. However, people aged 65 and over will be exempt from the new rules.
People saving up for their first home may want to look at opening a Lifetime ISA. With this account, you can pay in up to £4,000 each tax year, and the Government will pay a 25 percent bonus on any deposits, up to £1,000 each tax year.
The bonus is paid out immediately after you make a deposit. This also has a property cap, as you can only used the fund towards purchasing your first home if it’s worth £450,000 or less.
Only people aged between 18 and 39 can open a Lifetime ISA. You can only pay into the account up to the age of 50. You can also use the funds towards your later life, as you can access the cash when you turn 60.
Account holders face a 25 percent withdrawal charge if you take any money out for another reason other than for your first home or when you turn 60.
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