Two documents related to Individual Savings Accounts (ISAs) were released by the Government as part of Tax Update 2026 on 23 June 2026 and are discussed below.
First Time Buyer ISA
HM Treasury published a consultation for the First Time Buyer (FTB) ISA, and it is refreshingly simple.
Savers will pay subscriptions into a FTB ISA, and the Government will pay a bonus based on those subscriptions less any withdrawals at the point of buying a house. No withdrawal penalty. No retirement option.
The subscription limit, bonus percentage and house price limit are all to be determined - with HM Treasury noting that lower subscription limits and lower house prices allow a larger government bonus to be paid - and this becomes an issue of targeting which could "...shift the benefits towards lower income savers outside London and the South East".
Responses are due by 17 August 2026.
Given that Lifetime ISA penalties exceeded house purchases for the first time last year, this is a very timely consultation. Lifetime ISAs are only offered by a small number of ISA Managers, and hopefully the new simpler rules will mean that the FTB ISA can be offered more widely and attract more savers.
Cash ISA anti-avoidance rules
Anti-avoidance rules were expected to be published following the lowering of the cash ISA limit announced at the 2025 Autumn Budget. Those rules, to enforce the Cash vs Stocks & Shares ISA split from 6 April 2027, were published on 23 June 2026.
As with the FTB ISA, the rules are surprisingly simple:
- No transfers from Stocks & Shares ISAs to Cash ISAs from 6 April 2027, unless you're over 65;
- Interest on cash balances taxed at 22 percent (the new basic rate for savings income); and
- Stocks & Shares ISAs which are 100 percent invested into Money Market Funds will be non-qualifying investments.
The final rule appears to be drafted in a way that allows HMRC to respond to other avoidance patterns in the future - other investments could be designated as 'cash-like' for these purposes, and the 100 percent threshold could change.
These simple rules might not be as easy to operationalise – the final rule, in particular, will need careful consideration where investment levels fluctuate or hold temporary positions. A technical consultation is expected to be published soon, ahead of regulations ready for autumn 2026.
Conclusion for individual savers
Individuals should continue to consider making good use of their annual ISA allowances and note the anticipated anti avoidance changes restricting cash in non-cash ISAs from April 2027 and interest on cash balances.
Simplification of FTB ISAs is welcome and hopefully the FTB ISA will be offered more widely.
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