Model ISA subscription limits and per-person cash and stocks-and-shares ISA subscriptions #2710

Summary

policyengine-uk can't score a change to the ISA allowances: not the £12,000 cash limit from April 2027, a reversal of it, or a change to the £20,000 overall limit.

• The model has no ISA subscription limits.
• It has no inputs for what people pay into cash or stocks-and-shares ISAs.
• It holds the balances of those two ISA types per household only.

So a reform to an ISA limit leaves every household unchanged and scores £0. This issue lists the engine pieces needed. A data issue for Microcosm would supply the inputs.

What main has today (65da54d)

• Balances: household cash_isa and stocks_and_shares_isa; the latter is part of corporate_wealth.
• ISA returns: person individual_savings_account_interest_income, individual_savings_account_dividend_income and non_cash_isa_cash_interest, with the 2027-28 charge on cash interest in non-cash ISAs (isa_cash_interest_flat_rate_charge, from Fix ISA income and capital treatment; model bonuses and charges #2589).
• Lifetime ISA:
  • lifetime_isa_payments, lifetime_isa_bonus and the withdrawal charge;
  • the gov.hmrc.isa.lifetime.* parameters, including payment_limit (£4,000).
• No other ISA limits under gov.hmrc.isa.

What's needed

1. Parameters

Model them on gov.hmrc.isa.lifetime.payment_limit:

• The overall annual subscription limit: £20,000 from 6 April 2017 (ISA Regulations 1998 reg 4ZA(1)).
• The cash ISA subscription limit: £20,000 to 5 April 2027, then £12,000 from 6 April 2027 for people aged 64 or under at the end of the tax year (reg 4ZA(1ZA), inserted by SI 2026/1018).
• The age at which the full limit applies to cash (65), as its own parameter, so a reform can move it.

Possible paths: gov.hmrc.isa.annual_subscription_limit, gov.hmrc.isa.cash.subscription_limit and gov.hmrc.isa.cash.full_limit_age.

2. Inputs per person

Model them on lifetime_isa_payments:

• cash_isa_subscriptions and stocks_and_shares_isa_subscriptions: new money paid in during the tax year.
  • Exclude transfers between ISAs, interest and growth.
  • Their documentation should say how flexible-ISA replacements are treated.
• A total isa_subscriptions that adds these to lifetime_isa_payments. Innovative Finance ISAs would be a third input if wanted; HMRC's tables leave them out.

3. Formulas

• cash_isa_subscription_limit: the cash limit that applies to the person in the year, by age.
• cash_isa_subscriptions_above_limit and isa_subscriptions_above_limit: how far the inputs exceed the limits in force.
  • Under a reform these are the amounts that must go somewhere else.
  • Under current law with reported data they should be zero; tests should hold that.

4. Where money above a limit goes (needs a decision)

The tax effect depends on behaviour. Three options:

• (a) A behavioural parameter block, under gov.contrib or alongside the existing behavioural responses. It splits the excess cash into stocks-and-shares ISAs (no tax change), taxable savings, and other uses.
  • The taxable part earns interest, which adds to savings_interest_income above the personal savings allowance.
  • It needs an interest-rate assumption: for example, the person's own ISA interest yield, or an ONS rate.
• (b) The engine reports only the excess. The analysis code applies the behaviour.
• (c) Both: (b) by default, (a) as an opt-in.

A static annual model can't build up displaced balances across years by itself. Scoring 2028-29 onward would also need a supplied input for cash moved out of ISAs in earlier years. That is a question for the data and the analysis, not this issue.

5. Per-person balances (optional here, needed later)

cash_isa and stocks_and_shares_isa are household inputs. Per-person balances, with the household totals as sums, would follow the Lifetime ISA precedent:

• lifetime_isa_balance per person;
• household_lifetime_isa_balance with adds.

That change needs a coordinated Microcosm export.

6. Tests

YAML tests at the boundaries:

• ages 64 and 65 at the end of the tax year;
• 2026-27 against 2027-28;
• subscriptions exactly at, and just above, each limit;
• the excess under a reform that restores £20,000 for cash, and under one that lowers the overall limit.

Data dependency

Microcosm has no ISA subscriptions: the Wealth and Assets Survey records ISA values, not payments. Until there's an imputation, these inputs default to zero and population runs stay at £0. HMRC's ISA tables (September 2026) are the natural targets for one:

• Table 9.7, individuals by income, size of subscription and ISA type, 2023-24;
• Table 9.8 by age and type;
• Table 9.9 by region and type;
• the totals in Table 9.4.

A separate PolicyEngine/microcosm issue should cover that.

Out of scope

• Junior ISAs and Child Trust Funds.
• Transfers between ISA types, and the 2027 ban on stocks-and-shares-to-cash transfers for under-65s.
• Innovative Finance ISAs, unless added as above.
• Lifetime ISA rules, already in from Fix ISA income and capital treatment; model bonuses and charges #2589.

References

• ISA Regulations 1998 (SI 1998/1870), reg 4ZA.
• SI 2026/1018, the Individual Savings Account (Amendment) (No. 2) Regulations 2026.
• HMRC, Cash ISA limit reduction: tax information and impact note, 17 September 2026.
• HMRC, ISA statistics, September 2026.
• Related: Current-law ISA rules for the household calculator: ISA income, cash ISAs as capital, the Lifetime ISA bonus and charge, the Help to Buy ISA bonus #2584 (closed by Fix ISA income and capital treatment; model bonuses and charges #2589), PolicyEngine/microcosm#1360.