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I was playing on 1.15.1 and have downloaded 1.16.2. To update would I need to create a new game or would it apply itself? 

(+2)

Saves will always be there unless you delete them from %appdata%.

By the way, v0.17 will release in less than 2 weeks!

Thanks about the saves, will the new 1.16.2 version transfer onto my old 1.15.1 save though? Because I believe there are certain pieces that weren't allowed before as the content wasn't out yet.

New version is always good to hear!