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Are people thinking ISA first?

Published on: 25 March 2026 4 min read

Simon Caddick

Savings Director

Simon's profile

At a glance:

  • ISA rules are undergoing their biggest shift in years, with April 2027 reforms set to reduce the cash ISA limit to £12,000 and encourage longer‑term investing while keeping the overall £20,000 allowance unchanged.
  • Saver behaviour is diverging, with confident multi‑ISA users planning and reviewing their contributions, while non‑engagers remain held back by confidence barriers, misconceptions, and fear of making mistakes.
  • Generational and technological trends are reshaping engagement, as younger savers increasingly learn from social media and more people rely on AI‑powered tools for savings and investment decisions, raising new regulatory considerations.
  • The reforms aim to strengthen long‑term financial resilience, shifting the UK from a cash‑dominant culture toward goal‑aligned, investment‑based saving, supported by digital access, clearer guidance, and collaboration across industry and policymakers.

With winter behind us we’ve entered not one, but two new seasons – spring, and ISA season. People might know lots about spring but less about Individual Savings Accounts (ISAs), and people might be wondering why it’s such an important time.  

In simple terms, ISA season runs over March and April and it’s when people are encouraged to use their ISA allowance before the current tax year ends on 5 April, and get in early as the new one starts on 6 April.  

As the ISA framework prepares for one of its most significant shifts in recent years, its changes extend far beyond individual savers. The changes, due to be in place from April 2027, mark an inflection point in how households save, invest, and build long-term financial resilience. 

Simple steps to help consumers make the best ISA choices  

Consumers can often feel overwhelmed when it comes to ISAs, with 45% of people feeling anxious, stressed or frustrated. There’s a perception that there’s lots of rules, lots of different products, and not knowing where to start. In some cases this can be off-putting. But it’s simple when it’s been broken down: 

  • ISAs all share one key feature: they offer a tax-free wrapper for savings and investments.  
  • When choosing an ISA, people should keep two things in mind:  
    • The annual allowance 
    • The types of ISAs available 
  • The annual ISA allowance is £20,000 per tax year, set by the government.  
  • Any money paid into an ISA before 5 April can grow tax free on interest, dividends, or capital gains 
  • On 6 April, the new tax year starts and the £20,000 allowance resets 
  • ISA allowances can’t be carried forward, it’s use it or lose it 
  • The £20,000 limit can be split across different ISA types, but savers cannot exceed the total in a single tax year 
  • Savers with multiple ISAs need to track contributions themselves, as providers can’t see across accounts 
  • Choosing the right ISA depends on personal goals, existing savings, and risk appetite  
  • Timing matters: thinking about when the money will be needed helps determine which ISA is most appropriate 
  • You don’t need lots of money to open an ISA, 48% of people without an ISA say it’s because they feel they don’t have enough to put aside, but some ISAs can be opened with as little as £1. 

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What are the different types of ISA, and what are they for? 

There are five main types of ISA that people can open: 

Cash ISA 

This is a popular ISA where the balance won’t fall in value, but it typically offers lower growth and may lose buying power over time due to inflation. There are also lots of options: if people can lock their money away for longer, fixed-rate products (for example, 1, 2 or even 5 years) may offer higher rates. 

Stocks and shares ISA 

If people want to achieve higher potential returns and can accept a little more risk, they could invest in a stocks and shares ISA. These allow people to hold a range of investments, with any income or gains made free from UK income tax and capital gains tax. Staying invested for five years or more usually offers better growth than cash savings, but investment values can do down as well as up. 

Innovative finance ISA 

We get a little more niche when we look at the third ISA option. In simple terms, an innovative finance ISA is where people can invest in peer-to-peer lending and crowdfunding projects. It’s much riskier that the likes of a cash ISA or stocks and shares ISA but returns are likely to be higher. IF ISAs are not covered by FSCS. 

Lifetime ISAs 

These have been around since 2017 and are there to help people save for their first home (limits to property values apply) or retirement. People could earn a Government bonus of 25% on the savings but can only use part of their ISA allowance each tax year. The lifetime ISA allowance is currently £4,000 and people can only withdraw the funds to buy their first home or support retirement when they reach 60 and over – but people need to beware the exit charge of 25% if they withdraw for any other reason.  

Junior ISAs 

The junior ISA is specifically designed for children with an annual savings limit of £9,000. Meaning that an adult saver could max out their annual allowance and still save into the junior account for their child on top of this. Children can have cash or stocks and shares ISAs, but can only have one of each. 

Across these ISA choices, you can have £20,000 in Cash / Stocks and Shares and a LISA, then an extra £9,000 in Junior ISAs per child on top.  

But changes to ISA rules will be coming in 2027. 

What are the key ISA rule changes?

There is no change for those aged 65 and over, for those under 65 the confirmed policy shifts from April 2027 mean, the cash ISA limit will reduce to £12,000, a change aimed at encouraging habitual cash only savers to consider investing by lowering the amount that can be sheltered in cash while keeping the overall £20,000 ISA allowance unchanged (now frozen until 2031).  

To make full use of the allowance, at least £8,000 would need to be placed into stocks and shares options. Alongside this, income tax rates on savings interest earned outside ISAs and the Personal Savings Allowance will rise by 2%, and tax rates on dividend income will increase from April 2026 further enhancing the relative attractiveness of the tax efficient ISA wrapper. 

But even among those already aware of the changes, only 46% feel they have enough information to make decisions about their savings and investments, highlighting just how important clear guidance will be as the new rules take effect. 

Why are these ISA changes being made? 

The policy objective is to encourage long term investment participation among consumers who historically default to cash, even where their time horizon makes investing more suitable. This aligns ISA rules more closely with long term wealth building and reduces reliance on cash for goals that may span decades. 

How are savers and non-savers approaching ISAs?

Behavioural data across the sector shows a widening gap between ISA maximisers and consumers who do not engage with ISAs at all.

Behaviours of active ISA users:

Active ISA users tend to be quite intentional: they choose different ISA types based on what they’re saving for and how long they have, often pairing a short-term cash ISA with a longer-term investment ISA. They’re usually more confident about investing too, with a clearer understanding of risk and how it can support long-term financial resilience.

Rather than setting and forgetting, many keep an eye on the rules and review what they’re contributing when limits change, unlike customers who still pay in the historic amounts from pre-2017 rules. And increasingly, they take a multi-ISA approach, using products across more than one provider or brand to help them meet different financial goals. 

Behaviours of non-engagers:

Many people who don’t currently have an ISA aren’t disengaged by choice, they’re held back by a mix of practical worries and confidence barriers. A common misconception among non-ISA holders is that you need a large amount of money to get started, which can make the whole idea feel out of reach.

Others worry that opening an ISA means their money will be locked away (14%) when they might need flexibility, or they believe there are better ways to grow their savings (12%). And for some, they are unsure about the rules and don’t want to make a mistake (12%) suggesting the rules still feel complex and intimidating, and creating a fear of getting something wrong.

This lack of confidence is often rooted in how people have learned about money in the first place with a significant number teaching themselves through trial and error, it’s easy to see why unfamiliar financial products can feel risky rather than reassuring. 

The policy challenge is as much behavioural as structural: without engagement, households miss opportunities to build tax efficient wealth early, potentially increasing future tax exposure.  

Many people also reflect that they could have saved more (45%) or believe they had started saving too late (23%), which reinforces the confidence gap that often holds people back.

Four engagement shifts to look out for: 

With the April 2027 reforms set to reshape how people can use cash and investment ISAs, the real test won’t just be what the rules say, but how customers respond in practice. We’re already seeing a widening gap between active ISA users who plan and review their savings, and those who don’t engage at all – often because the benefits don’t feel immediate.  

Against that backdrop, here are four engagement shifts that will be worth watching as the changes bed in, and as firms and regulators try to build confidence and participation. 

1. Behavioural shifts among cash savers 

Reduced cash allowances may encourage households to access investment markets for the first time, or disengage entirely if confidence remains low, with 52% of those aware of the changes not expecting the rules to have any influence on their savings and investing behaviours. Lloyds Banking Group has joined 17 other leading firms to launch the UK Retail Investment Campaign, encouraging Britons to think about investing their money for their long-term financial success. 

2. Regulation of digital guidance tools 

As artificial intelligence (AI) increasingly influences how people save and invest, a clearer articulation of the regulatory perimeter by government and regulators will be essential – particularly what constitutes regulated activity across investments when AI is used. 

3. Generational divergence 

Younger savers are highly influenced by online financial content. This creates both opportunities for engagement and challenges in combating misinformation. 

4. Economic resilience implications 

Higher household saving, particularly when channelled into investments, contributes to: 

  • Stronger financial buffers; 
  • Increased long-term financial independence; 
  • Greater macroeconomic stability. 

ISAs are one of the most effective policy tools for supporting this.

Technology’s role in shaping the future of saving and investing 

Technology is rapidly transforming how customers interact with savings and investment products, with meaningful consequences for financial resilience, consumer protection, and regulatory oversight. 

With 38% of 18-24 year olds learning about money from social media channels, and as we see more people using AI powered tools to guide their financial decisions, we know that technology role in managing finances will continue to grow and evolve significantly.  

Digital access as the new baseline 

The widespread adoption of mobile banking has increased the visibility of savings, made it easier for customers to adjust contributions quickly, and supported more confident decision-making, especially among younger consumers. 

This is a key enabler of the Government’s intent to broaden investment participation. 

Digital assets in 2026: building the future of finance in the UK

Peter Left | 13 Jan 2026

The financial services industry stands on the brink of a transformation as profound as the arrival of the internet itself. In 2026, digital assets will move from the periphery to the heart of mainstream finance, reshaping how businesses and individuals interact with money, markets, and each other.

Read Peter's article

The ISA regime is entering a period of strategic reform; more investment focused, more digitally driven, and designed to align with long-term saving behaviours. For industry and policymakers, the opportunity is significant. To support a system that broadens participation, enhances financial resilience, and ensures consumers have the tools and confidence to make informed decisions. 

The direction is intentional. A shift from a cash dominant savings culture to goal aligned, investment based saving, underpinned by technology that simplifies complex decisions.  

Delivering on this ambition will require ongoing collaboration between industry, government and regulators. But the potential long-term benefits for households and the wider economy are considerable.  And as an integrated financial services provider we offer choice, convenience and reach to help our consumers with their savings and investments across all their goals. 

 

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,153 UK adults. Fieldwork was undertaken between 3-4 February 2026. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).  

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