Like many great ideas, the Isa owes its success to its simplicity. Up to £20,000 can be sheltered in these tax-free savings and investment accounts every year; a hugely valuable tax break used by millions of Britons whose savings goals range from buying a property to funding their retirement. However, I have long argued that millions more would understand and sign up for the benefits if their complexity were reduced.

I sense the chancellor gets the message, but Budget announcements about new Isas for first-time buyers and first-time investors risk diluting the “keep it simple” philosophy.

John Healey’s announcement that he will scrap plans to slash the annual cash Isa allowance from £20,000 to £12,000 next year (first revealed by the FT) is to be applauded.

His predecessor Rachel Reeves wrongly believed that lowering the limit for under-65s would push Britons to invest more in stocks-and-shares Isas. Instead, it caused a stampede to make full use of the cash savings allowance before it was cut. It also threatened to make investing much more complex.

Workarounds to stop people circumventing the £12,000 limit by holding cash in their stocks-and-shares Isas included charging tax on interest — ending the tax-free wrapper — and banning transfers back into cash Isas, even though this is a common de-risking strategy.

This Budget’s Red Book did not say whether those unwelcome rules would be swept away, but the Treasury has confirmed it will take this logical next step. They have already, however, wasted the time and money of investment platforms, which are understandably frustrated that their efforts to implement changes that were due to go live in April were for nothing.

So the chancellor will have his work cut out persuading them to back the creation of yet another product, the “Starter Isa” for first-time investors. This is not his idea, but that of Money Saving Expert’s Martin Lewis. He proposed last year that younger investors should have the incentive of a bespoke entry-level product that paid a small bonus, capped at a few thousand pounds of the Isa allowance. This, he believed, would get newbies to invest.

It’s a neat idea, but I would question the need for a separate product. A recent regulatory tweak called targeted support gives banks and providers much more scope to proactively educate would-be investors about stocks-and-shares Isas, which can be set up in a few clicks.

Yes, more people should be investing for the long term, but to build that culture in Britain we need the carrot of education, not the stick of slashing allowances and adding complexity. When we do talk about Isas, far too much of the conversation is devoted to explaining the rules, restrictions and catches.

There is no better (worse) example than the Lifetime Isa. Introduced nearly a decade ago to help the under-40s buy a first property or save for retirement, its confusing dual premise meant none of the high street banks decided to offer it.

The worst rule — which I pointed out at launch — was a £450,000 price cap on the value of a property it could be used to buy. Saving up a deposit takes a long time, yet the rules never specified whether this limit would rise with inflation. It never has, yet first-time buyers who were priced out of using their savings to buy a home faced a penalty charge if they took their cash out.

Healey’s decision to remove this penalty is the right move and another victory for simplification. But it has come too late for many. Between 2018 and 2024, more savers were charged for making withdrawals than those managing to use the Lifetime Isa to buy their first home, according to a Moneyfacts analysis of HMRC data.

His new First Time Buyer Isa won’t launch until 2029. While it also has a £450,000 property price cap, the chancellor intends to get around the problem by only paying the 25 per cent government bonus when a property is purchased. It also has no upper age limit, reflecting the fact that the average age of a first-time buyer is rising fast. Nevertheless, the price cap means this Isa will only really benefit buyers outside London and south-east England.

There is a further hidden benefit to Healey’s simplification drive. Reversing next year’s cash Isa restrictions has been welcomed by the building societies, for which Isa deposits are a key source of mortgage funding. More than half of homebuyer lending from building societies goes to first-time buyers. With interest rates on mortgages high and rising, any measures that could improve competitiveness will benefit borrowers.

Having the discipline to keep the Isa landscape as simple as possible will benefit investors, savers and property buyers alike. The easier the tax-free benefits are to understand, the more people can share in them.

Claer Barrett is the FT’s consumer editor; claer.barrett@ft.com Instagram @ClaerB

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