Cash ISA Allowance Changes 2027: The New £12,000 Limit Explained

Compound Interest Calculator

What Was Announced at Autumn Budget 2025 — and When It Takes Effect

At the Autumn Budget on 26 November 2025, the Chancellor announced the first cut to the cash ISA allowance since ISAs launched in 1999. From 6 April 2027 — the start of the 2027/28 tax year — adults under 65 will be able to put at most £12,000 of new money into cash ISAs each tax year. The overall ISA allowance stays at £20,000, so the remaining £8,000 can only be subscribed to stocks and shares ISAs, Innovative Finance ISAs or, within its own £4,000 cap, a Lifetime ISA. Savers aged 65 or over keep the full £20,000 cash limit. The change will be made by amending the Individual Savings Account Regulations 1998 (SI 1998/1870). HM Treasury and HMRC published draft anti-circumvention rules in a 2026 factsheet ('ISA reform 2027'), which are under technical consultation with industry, and the final regulations are expected to be laid in autumn 2026 — comfortably before the April 2027 start. The headline £12,000 figure and the commencement date were confirmed at the Budget itself, but the fine detail — particularly the anti-avoidance mechanics covered below — remains draft and could be refined before implementation.

What Stays Exactly the Same

The reform is narrower than the headlines suggest. The overall ISA allowance stays at £20,000 a year — the Budget cut the cash portion, not the total. Every pound already inside a cash ISA on 5 April 2027 is untouched: existing balances keep their tax-free status indefinitely, keep earning tax-free interest, and there is no requirement to move or invest them. Stocks and shares ISAs and Innovative Finance ISAs can still receive up to the full £20,000 of new money each year. The Lifetime ISA limit stays at £4,000 (counted within the overall allowance, and still attracting the 25% government bonus) and the Junior ISA limit stays at £9,000 per child — both are fixed until at least 5 April 2031 under existing government announcements. Savers aged 65 and over keep the full £20,000 cash limit. Transfers from cash ISAs into stocks and shares ISAs remain permitted after April 2027, and transfers of existing balances between cash ISA providers — which have never counted against the annual allowance — are expected to continue as now, subject to the final regulations. In short: the wrapper survives intact; only the flow of new cash into it is being redirected for under-65s.

Who Is Affected — and Who Is Exempt

The cut only bites if you are under 65 and put more than £12,000 of new money into cash ISAs in a single tax year. HMRC's annual ISA statistics show that most cash ISA subscribers pay in well below that figure, so the typical saver drip-feeding a few hundred pounds a month will notice no difference. The savers most affected are those parking large lump sums — an inheritance, a property sale, redundancy pay or a maturing fixed-rate bond — who have routinely used the full £20,000 in cash. Three groups are exempt or unaffected. First, anyone aged 65 or over keeps the £20,000 cash limit, and under the draft rules the higher limit applies from the start of the tax year in which you turn 65 — so for 2027/28, anyone born on or before 5 April 1963 qualifies for the whole year. Second, Junior ISA savings sit outside the change entirely, with their separate £9,000 per-child limit. Third, existing balances are grandfathered: a saver with £150,000 accumulated in cash ISAs keeps every pound sheltered and earning tax-free interest. Note that the age-assessment rule sits in draft regulations and could be refined before April 2027, so treat the precise mechanics as provisional.

The Anti-Avoidance Rules: 22% Charge, Transfer Ban and Fund Limits

Alongside the headline cut, HM Treasury and HMRC published draft anti-circumvention rules (the 'ISA reform 2027' factsheet, 2026) designed to stop savers recreating a £20,000 cash ISA inside other wrappers. Three measures matter, and all are draft pending final regulations expected in autumn 2026. First, from April 2027 a flat 22% charge will apply to interest (or alternative finance return) paid on cash held inside a non-cash ISA — for example, uninvested cash sitting in a stocks and shares ISA. ISA managers will deduct the charge and remit it to HMRC, so there is nothing to self-report. Worked example: £5,000 left uninvested at 4% earns £200 in a year; the 22% charge takes £44, leaving £156. Second, transfers from stocks and shares or Innovative Finance ISAs into cash ISAs will be banned for under-65s; the restriction is waived at 65 and over. Transfers in the other direction — cash into investments — remain allowed. Third, money market funds become the only permitted 'cash-like' asset in a non-cash ISA, and only as a partial allocation: a stocks and shares ISA cannot be 100% money market funds. Because these rules are still in technical consultation with industry, treat the percentages and mechanics as provisional until the regulations are laid.

What to Do Before April 2027

The 2026/27 tax year, which ends on 5 April 2027, is the final year an under-65 saver can put the full £20,000 into cash ISAs — so if cash suits your goals, using the current allowance in full is the single most valuable move, because money subscribed before the deadline is grandfathered permanently. Fixed-rate cash ISAs are worth a look for the same reason: a two- or five-year fix opened now locks both the rate and the tax shelter well past April 2027. If you hold uninvested cash inside a stocks and shares ISA, decide before April 2027 whether to invest it or transfer it to a cash ISA — under the draft rules that transfer direction is banned afterwards for under-65s, and any interest on cash left behind faces the 22% charge. Do not withdraw money from an ISA to 'protect' it: withdrawal permanently loses the wrapper unless your provider offers a flexible ISA and you replace the money within the same tax year. Finally, check whether the cut actually affects you at all — if you have never subscribed more than £12,000 of new cash in a year, nothing changes for you, and there is no reason to let a deadline rush you into fixed-term products you do not need.

Cash vs Stocks & Shares: The £8,000 Decision Maths

From April 2027, an under-65 saver who previously put £20,000 a year into cash faces a choice for the displaced £8,000: a taxable savings account or a stocks and shares ISA. The figures below use illustrative assumptions — cash at 4% AER and a diversified global fund returning 6% a year net of fees — not forecasts. Taxable route: £8,000 at 4% earns £320 of interest in year one. The personal savings allowance (£1,000 for basic-rate taxpayers, £500 for higher-rate, nil for additional-rate) may cover it entirely: a basic-rate taxpayer with unused allowance pays nothing, while a higher-rate taxpayer who has already used theirs pays 40% of £320, or £128. Investment route: £8,000 in a stocks and shares ISA at the assumed 6% grows by £480 in year one, tax-free — but capital is at risk. Over ten years, a one-off £8,000 grows to roughly £11,840 at 4% versus roughly £14,330 at 6% — about £2,500 more on those assumptions. Equity returns are not guaranteed; shares can lose money over any period, and cash has beaten them in some stretches. A workable rule of thumb: money you may need within about five years belongs in cash, taxable if necessary; money with a ten-year-plus horizon is where the pushed-out £8,000 arguably belongs — precisely the behaviour the policy is designed to encourage.