ISA and CTF rule changes take effect for recognised funds, LTAFs and flexible ISAs

Elements of the Individual Savings Account and Child Trust Funds (Amendment) Regulations 2025 covering Child Trust Funds, recognised funds, Long Term Asset Funds and flexible ISAs took effect on 15 July 2025, HM Revenue & Customs said¹. The regulations were published on 24 June 2025 and updated on 26 June 2025¹.

The measure allows recognised funds in the Temporary Marketing Permissions Regime (TMPR) at the start of the transitional period to remain as ISA and Child Trust Fund qualifying investments until 1 January 2027². It also includes Long Term Asset Funds (LTAFs) within the qualifying investment types for the Innovative Finance ISA². HMRC said the change to flexible ISAs means that where current year subscriptions are withdrawn from a flexible account, the amount subscribed in the tax year is reduced by the amount withdrawn, and any withdrawal exceeding the amount subscribed in the current year is treated as a previous year subscription². Replacement of a previous year's subscriptions may only be made to the account from which the cash withdrawal was made².

A separate element requires ISA managers to obtain a National Insurance number from all investors who are eligible to have one, when receiving a subscription to an ISA from 6 April 2027². Where an investor is not eligible, the manager must obtain confirmation of that before an account can be subscribed to². HMRC said the requirement will help identify individuals subscribing to an ISA and is consistent with the Lifetime ISA rules².

HMRC said the measure will have a negligible impact on approximately 550 ISA and CTF managers, and that the final costing will be subject to scrutiny by the Office for Budget Responsibility and set out at a future fiscal event². It also said the measures are not expected to have any significant macroeconomic impacts². At Autumn Budget 2024, the government announced that digitalisation of ISA reporting would be mandatory for all ISA managers from 6 April 2027².

Why it matters for households

Savers holding an ISA or a Child Trust Fund are affected, along with the banks, building societies and other institutions that manage those accounts². From 15 July 2025, funds that were recognised within the TMPR at the start of the transitional period can stay as qualifying investments in an ISA or Child Trust Fund until 1 January 2027, and LTAFs count as a qualifying investment type for the Innovative Finance ISA². For flexible accounts, the amount treated as subscribed in the current tax year falls by the amount withdrawn, which HMRC said allows individuals to subscribe withdrawn funds to another ISA within the same tax year with no additional restrictions on replacement².

From 6 April 2027, an investor making a new ISA subscription must give the manager a National Insurance number, or confirmation that they are not eligible for one, before the account can be subscribed to². HMRC said individuals who are eligible for a number but do not know it will need to obtain it before subscribing, and that those not eligible will still be able to subscribe once they have confirmed this to their manager². HMRC described the number of UK individuals who could subscribe to an ISA but are not eligible for a National Insurance number as likely to be very low, broadly limited to those who have never worked, been part of a child benefit claim, applied for a student loan or claimed a benefit².

What happens next

The National Insurance number requirement takes effect from 6 April 2027¹. The treatment of recognised funds in the TMPR as ISA and CTF qualifying investments runs until 1 January 2027². HMRC said the measure will be kept under review through communication with affected taxpayers and the financial services industry².