What is the ‘Starter ISA'?

Chancellor John Healey has announced plans for a new type of ISA, hoping it will persuade more people in Britain to begin investing.

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The Starter ISA was one of the most striking measures in Chancellor John Healey's first Autumn Budget.

Very little has been disclosed about the product so far. It will be developed with the UK's investment industry and is intended to encourage more Brits to invest. Even so, some believe it could prove more successful than earlier efforts to build an investing culture.

"A Starter ISA may do far more to create a new generation of investors than efforts to move people out of cash," said Isabella Galliers-Pratt, senior investment director at wealth manager Rathbones. She argued that the main obstacles are usually a lack of confidence, limited understanding and the fear of losing money - not a lack of tax-efficient products.

In the 2025 Autumn Budget, then-chancellor Rachel Reeves proposed cutting the annual cash ISA deposit limit for people under 65 to 12,000 from April 2027. The aim was to steer the remaining 8,000 of the total 20,000 annual ISA allowance into stocks and shares.

Critics said the policy made ISAs needlessly complicated. In his Budget, Healey dropped it and confirmed that the annual cash ISA limit will stay at 20,000.

What might the Starter ISA look like?

Healey still supports Reeves's aim of encouraging more Britons to invest. Rather than reduce the cash ISA allowance, she plans to introduce a new Starter ISA, designed in partnership with the investment industry to "reward first-time investors," as Healey puts it.

The official government Budget document said the government would "explore a new ISA incentive for people investing in a stocks and shares ISA for the first time." Its detailed design will be developed with industry.

There is little information yet about the product's design or how it will encourage people to invest. The wording does suggest a financial incentive to choose a stocks and shares ISA instead of the cash equivalent, rather than the creation of an entirely new ISA product.

Martin Lewis, who founded the consumer finance website MoneySavingExpert, discussed the scheme in a video released after the Budget. He said he had spoken with Healey about encouraging people to begin investing.

"Basically, my proposal was that the first 2,000 you put into a stocks and shares ISA should receive a 10% uplift," Lewis said. He also claimed he would take part in the government's consultation with industry.

There isn't any clarity yet on whether this is the form the incentive will take.

"The detail will matter, but the right education and support - combined with a worthwhile incentive for that first investment - could persuade more savers to become long-term investors," said Galliers-Pratt of Rathbones. "A government top-up on an initial investment, for instance, would give people a tangible reason to take the first step."

"Investing should feel accessible and worthwhile - not merely more appealing than holding cash," she added.

The ISA's success will likely depend on keeping the system as simple as possible.

"Policymakers should learn from the complicated and unpredictable ISA rule changes of recent years as they consider the new Starter ISA," said John Owen, chief executive of the Investment Association, the industry body representing the UK's fund managers. "The Government should now adopt a consistent, long-term approach to ISA policy so people can build greater financial resilience."