ISAs and means-tested benefits

Money held in an ISA is tax-free, but it is not invisible to the benefits system. For means-tested benefits such as Universal Credit and Housing Benefit, the balance in your ISA counts as capital, just like money in an ordinary savings account. Once your capital goes above £6,000, your Universal Credit payments start to be reduced, and once your capital is £6,000 or less again, the reduction stops¹. The tax-free status of an ISA changes how the interest is treated, not how the balance is treated.

The main exception worth knowing about is Help to Save, a government-backed savings scheme for people on low incomes. It pays a bonus of 50p for every £1 saved over four years, up to £1,200 in bonus money in total². Money you pay into a Help to Save account does count towards the £6,000 capital limit, but the bonuses themselves do not affect your Universal Credit payments³.

ISA savings count as capital for means-tested benefits

An ISA protects your savings from tax, not from the benefits assessment. Money held in ISAs remains free from UK Income Tax and Capital Gains Tax while it stays in the ISA⁴, but for means-tested benefits the balance is treated as capital in the same way as any other savings. That means the answer to the question "do ISAs affect benefits?" is yes, once the total amount you hold crosses the capital thresholds for the benefit in question.

The tax-free treatment does have one practical effect. Interest earned inside an ISA is tax-free, so it does not count towards your Personal Savings Allowance⁷, and because no tax is deducted from ISA interest, the whole balance grows and is assessed as capital. A saver whose ISA interest pushes them over a threshold will cross it slightly sooner than a saver earning the same gross rate in a taxable account.

The Lifetime ISA carries its own specific warning. The rules that providers must follow when comparing a Lifetime ISA with a pension state that the retail client's current and future entitlement to means tested benefits (if any) may be affected⁸. The Financial Conduct Authority's required wording makes the same point: saving in a lifetime ISA instead of a pension scheme may affect current and future entitlement to means tested benefits⁹. This matters because money in a pension is generally treated differently from money in a Lifetime ISA, so a person moving retirement savings from one to the other can change their benefit position. The dedicated page on does a Lifetime ISA affect Universal Credit covers this in detail.

The £6,000 savings threshold for Universal Credit and Housing Benefit

For Universal Credit, capital of £6,000 or less has no effect on your payments. Once your capital goes above £6,000, your Universal Credit is reduced, and once your capital is £6,000 or less, your Universal Credit will no longer be reduced¹. The reduction is worked out on your total capital, which includes savings accounts, ISAs and money in a Help to Save account.

For Housing Benefit the structure is different. Housing Benefit is usually not paid at all if your savings are over £16,000, unless you get Guarantee Credit of Pension Credit⁵. So a Housing Benefit claimant faces a single cut-off rather than a sliding reduction.

You or your partner can save up to £6,000 if you are getting Universal Credit or Housing Benefit, and this figure includes money held in a Help to Save account¹⁰. Capital is assessed at household level for these benefits, so it is the combined savings of you and your partner that count, not each person's balance separately.

Some amounts are kept out of the assessment. Amounts deducted from earnings under tax-exempt schemes, for example payments to purchase shares under a Share Incentive Plan, are not included when calculating Universal Credit entitlement¹¹. If you are self-employed, you must report your business income and expenses accurately to Universal Credit each month, even if self-employment is not your main work, you are not gainfully self-employed, or you had no income or expenses that month¹². Savings built up from that income, including inside an ISA, are then assessed as capital.

Working Tax Credit: savings and bonuses are not counted

Working Tax Credit works differently from Universal Credit when it comes to savings. Help to Save does not affect how much Working Tax Credit you get¹⁰, and Working Tax Credit is not affected by any savings or bonuses through Help to Save³. This is one of the reasons the scheme was designed around tax credits: a person could build savings without the bonus itself being treated as income that reduces their award.

The position matters for people still receiving tax credits rather than Universal Credit. Benefits such as Personal Independence Payment, Carer's Allowance and Disability Living Allowance are not moving to Universal Credit unless a working age benefit that is ending is also received¹³, and tax credit claimants move across under the managed migration timetable. While a person remains on Working Tax Credit, their Help to Save savings and bonuses leave that award untouched.

Help to Save: a savings scheme for people on low incomes

Help to Save is a government-backed savings scheme launched in 2018². It allows certain people entitled to Working Tax Credit or receiving Universal Credit to save up to £50 per month for up to four years and receive a bonus of 50p for every £1 saved². It is not an ISA: it is a separate scheme with its own rules, its own bonus structure and its own eligibility test, and it sits alongside ISAs rather than inside the ISA allowance.

The scheme is designed for people on low incomes who want to build a savings habit. The most you can pay into the account each calendar month is £50, which is £2,400 over 4 years⁶. There is no minimum payment needed to get the bonus¹⁰, so an account can be opened and used sparingly without losing entitlement to the bonus on whatever is saved.

Take-up has historically been low. At the time of the evaluation research, take up of the Help to Save account was low¹⁴. As of April 2026, the total number of open Help to Save accounts was 293,600, and since the start of the scheme 656,700 Help to Save accounts have been opened in total, with around 566,650 people having deposited into an account¹⁵. Among those who do use it, saving is close to the maximum: the average deposit per person per month has remained at £48, with 94% of monthly deposits being the maximum of £50¹⁵. However, there are 38,600 open accounts that have still received no deposit¹⁵.

Help to Save bonuses: up to £1,200 over four years

The bonus is the whole point of Help to Save. You can earn 2 tax-free bonuses over 4 years⁶, and the most you can earn from your savings in 4 years is £1,200 in bonus money⁶. The bonus rate is 50p for every £1 saved², which is a 50% return on whatever you manage to put away.

The two bonuses are worked out differently:

• First bonus, after your first 2 years: 50% of the highest balance you've saved⁶. For example, paying in £25 every calendar month for 2 years with no withdrawals gives a balance of £600, so the first bonus is £300, which is 50% of £600⁶.
• Final bonus, after 4 years: 50% of the difference between the highest balance saved in the first 2 years and the highest balance saved in the last 2 years⁶. If the highest balance grows from £600 to £800 in years 3 and 4, the final bonus is £100, which is 50% of £200⁶.

The bonus is payable at the end of the second and fourth years, based on the highest balance achieved over each period¹⁶. The first bonus is based on the highest balance achieved during the first two years, and the second bonus is based upon the difference between the highest balance saved in the first two years and the highest balance saved in the last two years². The bonus is paid every two years².

The "highest balance" mechanic rewards saving steadily and leaving the money alone. Because the first bonus looks at the highest balance at any point in the first two years, a withdrawal after a peak does not reduce that bonus. The final bonus is different: it is based on growth, so if your highest balance does not increase, you will not earn a final bonus⁶.

To put the numbers in context, if you had £1,200 after two years, this would increase to £1,800 with Help to Save¹⁸. The scheme compares well with the Lifetime ISA's government top-up of £1 for every £4 saved¹⁹, but the Lifetime ISA has a £1,000 annual bonus cap and different withdrawal rules, and as noted above it can affect means-tested benefits.

Who can open a Help to Save account

Eligibility for Help to Save is tied to benefits. You can open an account if you are living in the UK and are entitled to or receiving Working Tax Credit or Child Tax Credit payment, or claiming Universal Credit with a household income in your last monthly assessment period of £542.88 or more¹⁰. The official evaluation describes the eligibility test as receiving Working Tax Credit, being entitled to Working Tax Credit and receiving Child Tax Credit, or claiming Universal Credit with a take-home pay of £722.45 or more in the last monthly assessment period². The two figures differ because the Universal Credit earnings test has changed over time; the current published guidance figure is £542.88¹⁰.

The legislation behind the scheme set its scope at the outset: the scheme was open to around 4 million individuals who either received working tax credits at a rate other than nil, or a nil award working tax credit but at the same time had a child tax credit award at a rate other than a nil rate²⁰. A proposed amendment during the bill's passage would have allowed applicants under 25 to qualify for an account if they fulfilled the Working Tax Credit eligibility criteria for applicants over 25²¹.

Couples can each have an account. If you and your partner have a household award of tax credits or Universal Credit, you'll be allowed to open a Help to Save account each³. Each account is individual: the individual for whom a Help-to-Save account is opened is the person entitled to bonus in respect of the account²². You can also apply if you live in another country and you are a Crown servant or their spouse or civil partner, or a member of the British armed forces or their spouse or civil partner¹⁰.

The age rules are unusual. Where a contract is entered into by an individual who is 16 or 17 years old in connection with a Help-to-Save account, it has effect as if the individual had been 18 or over²³. This removes the normal legal barrier that would stop a 16 or 17 year old entering a binding contract.

How to open and pay into a Help to Save account

You can open an account online at gov.uk/helptosave or through the HMRC app¹⁰. You will need your National Insurance Number, your bank account details and a Government Gateway account, and if you cannot get online you can call HMRC on 0300 322 7093¹⁰.

The account is run by HMRC rather than by a bank in the usual sense, though this is set to change. From June 2026, a change enables financial institutions to offer Help to Save accounts directly to eligible customers²⁴, and the government has confirmed that the reformed Help to Save scheme will be delivered through a multi-provider model, with banks, building societies and credit unions able to offer accounts directly²⁵.

Paying in is straightforward:

1. Open the account online or through the HMRC app¹⁰.
2. Pay in up to £50 each calendar month, by debit card, standing order or bank transfer⁶.
3. There is no minimum payment, so you can skip months or pay in small amounts¹⁰.
4. Bonuses are calculated automatically at the end of years 2 and 4⁶.

The maximum amount you can save is £50 per calendar month¹⁰, and the most you can pay in over the four years is £2,400⁶. You do not need to make a minimum payment to get the bonus¹⁰.

Withdrawals, account closure and losing a bonus

Help to Save is flexible about access but strict about the account itself. You can withdraw savings to your bank account or close the account at any time, and the account stays open for four years¹⁰. You'll get any bonuses you've earned even if you withdraw money⁶. However, withdrawing money could mean you are not able to earn a final bonus, depending on how much you withdraw and when⁶, because the final bonus depends on your highest balance rising between the two halves of the term.

Closing the account early costs you the next bonus. The legislation provides for an amount of bonus to be nil in the case of an account that is closed, or otherwise ceases to be a Help-to-Save account, before the end of its maturity period²². The regulations state this plainly: the amount of a bonus is to be nil if the account is closed or otherwise ceases to be a Help-to-Save account before the end of a period in respect of which a bonus would otherwise be payable²⁶.

At the end of the term the account closes automatically. An individual's Help to Save account closes 4 years after they have opened it, and they are unable to reopen it or open another Help to Save account². The first automatic closures happened in January 2022, when the earliest accounts matured, and closures continue as accounts mature¹⁶. Because you are only allowed one Help to Save account, you won't be able to open another in the future³.

The contrast with the Lifetime ISA is worth noting, since both are government-bonused schemes. A Lifetime ISA holder making an unauthorised withdrawal can lose the Government bonus plus 6.25% of their own contributions²⁷. In one case the Financial Ombudsman Service reviewed, a saver was told she would lose her government bonus because the Lifetime ISA had been open less than 12 months, and a charge was applied on withdrawal²⁸. Help to Save's penalty structure is milder: you keep bonuses already earned, but forfeit the next one if you close early.

Help to Save protection

Help to Save is backed by the government, so all savings in the scheme are secure¹⁶. This is a different kind of protection from the compensation arrangements that cover ordinary bank accounts and cash ISAs. With Help to Save, the security comes from the government's own backing of the scheme rather than from arrangements around a particular provider.

This is one of the features that makes Help to Save distinct from saving in an ISA. A cash ISA held with a bank or building society depends on that institution's licence for its protection, as explained in how your ISA is protected. Help to Save's government backing means the money paid in and the bonuses earned are not exposed to the failure of a commercial provider, which is a meaningful distinction for a scheme aimed at people with very little financial cushion.

Changes coming to ISA allowances and Help to Save eligibility

Two sets of changes are on the way, one affecting cash ISAs and one expanding Help to Save.

For ISAs, from April 2027 the amount under-65s can pay into cash ISAs will be cut to £12,000 a year¹⁹. NS&I's guidance confirms this change will only apply to new deposits made from April 2027 and won't have any impact on savings already held⁴. The overall ISA allowance is unaffected by this change in the sense that your allowance resets every 6 April and cannot be carried over²⁹. The dedicated page on changes to the cash ISA limit covers the detail.

For Help to Save, eligibility is being extended. An amendment to the Universal Credit eligibility criteria for Help to Save accounts took effect from 6 April 2025³⁰. More significantly, the scheme is being expanded from April 2028 to all households receiving the child or carer's element of Universal Credit³¹. The Budget 2025 documents confirm that from 6 April 2028, the eligibility of the scheme will be extended to all Universal Credit claimants who receive the child or caring element³².

Alongside the wider eligibility, the delivery model is changing. The change enabling financial institutions to offer Help to Save accounts directly to eligible customers²⁴ and the confirmed multi-provider model²⁵ mean that from June 2026 the scheme will no longer be an HMRC-only operation, with banks, building societies and credit unions able to offer the accounts.

Where to get free help

Free, impartial help is available for both sides of this subject: the savings side and the benefits side.

• MoneyHelper, the government's free money guidance service, and the benefits section of this site explain how means-tested benefits are assessed.
• StepChange Debt Charity publishes guidance on saving while on a low income, including on Help to Save and on saving while repaying debts¹⁰.
• The cost of living advice published by the Scottish Government covers debt and money help available in Scotland³³.
• The Financial Ombudsman Service can consider complaints about ISA providers, including disputes over lost bonuses, as its Lifetime ISA case decisions show²⁸. How to complain is covered in complaining about an ISA provider.

For the general rules of ISA saving, the pages on how an ISA works, the ISA allowance and ISAs and tax cover the ground this page does not.