The government has confirmed the most significant change to ISA rules in a decade. From 6 April 2027, if you are under 65, you will only be able to put £12,000 a year into a cash ISA, down from £20,000. The good news is that you still have time to act.
If you have been saving into a cash ISA for years, you have probably come to rely on it. The tax-free interest, the simplicity, the security of knowing your savings are yours to keep. So the news that the government is cutting the cash ISA limit, confirmed in last year’s Autumn Budget, may have caught your eye and left you wondering what it means for you.
Here is the plain-English version.
What is actually changing with the cash ISA limit 2027?
Individual savings accounts, better known as ISAs, currently allow you to save or invest up to £20,000 each tax year free from income tax and capital gains tax. From 6 April 2027, if you are under 65, the most you will be able to put into a cash ISA each year drops from £20,000 to £12,000. The overall ISA allowance stays at £20,000. So the remaining £8,000 will need to go into an investment-type ISA, such as a stocks and shares ISA, if you want to use your full annual ISA allowance.
If you are 65 or older, nothing changes. You will still be able to use the full £20,000 cash ISA limit as cash.
Crucially, the new rules only apply to new cash ISA contributions made from April 2027 onwards. Any money you have already saved in a cash ISA is completely unaffected. It keeps its tax-free status, whatever the pot is worth.
Why is this happening?
The government wants more private savings channelled into investments rather than sitting in cash. The idea is that a stocks and shares ISA tends to work harder over time, benefiting both savers and the broader economy. Whether you agree with the rationale or not, the change is confirmed and coming.
It is worth noting that this is not happening in isolation. From this month, dividend tax rates have already risen for people holding investments outside an ISA wrapper. And from April 2027, the tax rate on savings interest outside an ISA will also increase, with basic rate taxpayers facing a rise from 20% to 22% on interest earned outside a tax-free ISA allowance. Together, these changes make the ISA wrapper, in whatever form, more valuable than it has ever been.
Tax rules and reliefs depend on individual circumstances and can change at any time, so it’s worth checking your position with an Adviser rather than assuming today’s allowances and rates will stay the same.
What the cash ISA limit change means right now
The 2026/27 tax year, which started on 6 April and runs until 5 April 2027, is the last full year where you can put up to £20,000 into a cash ISA. That is a window worth paying attention to.
Worth knowing: the numbers add up quickly
An ISA saver making the full £20,000 in cash ISA contributions each year at 4.5% interest accumulates around £246,000 in tax-free interest over ten years. Under the new £12,000 cash ISA limit, the same person builds around £148,000 over the same period, a difference of nearly £100,000. The sooner you use your full allowance, the more you protect.
If you have cash savings sitting outside an ISA, in an easy access savings account for example, now is a particularly good moment to review whether that money should be moved into your cash ISA while you still have the full £20,000 flexibility.
What about the stocks and shares ISA portion?
From 2027, if you want to use your full annual ISA allowance of £20,000, £8,000 of it will need to go somewhere other than cash. Most likely a stocks and shares ISA. We understand that investing can feel like unfamiliar territory, particularly if you have always preferred the certainty of cash savings.
The key thing to know is that you do not have to make any decisions about this right now. The change does not apply until April 2027, and when it does, there are many different ways to invest within a stocks and shares ISA. Unlike cash, the value of a stocks and shares ISA can rise and fall, so you could get back less than you put in, but many people accept that trade-off because investing has historically offered better protection against inflation than cash alone over the long term, although this is never guaranteed. Investments held within an ISA are free from capital gains tax on any growth, which is one of the tax benefits that makes the wrapper valuable for longer-term saving. From cautious funds to more adventurous options, the right approach depends on your goals, your timeline, and how comfortable you are with some level of risk. This is exactly the kind of decision that is worth talking through with an Adviser rather than making alone.
One thing to be aware of with ISA limits from April 2027
The government is also closing a loophole. From 6 April 2027, under-65s will no longer be able to transfer money from a stocks and shares ISA back into one cash ISA or split across cash ISAs to get around the new limit. This was a route some people used to effectively hold more than the cash ISA limit in cash savings. That option will no longer be available.
The short version
- The cash ISA limit for under-65s drops from £20,000 to £12,000 from 6 April 2027.
- The overall annual ISA allowance stays at £20,000. The remaining £8,000 must go into an investment ISA.
- If you are 65 or over, nothing changes for you.
- This year is the last full year under the current rules. If you have cash to shelter, use your full allowance.
- Existing ISA savings are not affected. Only new cash ISA contributions from April 2027 onwards.
Not sure what this means for your savings?
ISA rules can feel complicated, especially when they are changing. Whether you are wondering whether to use your full allowance this year, or thinking about what to do with the £8,000 investment portion from 2027, we are happy to talk it through.
