Cash ISA Allowance Cut to £12,000 from April 2027: What You Need to Know
— Off-Piste Wealth Financial Planning Team
From 6 April 2027 savers under 65 can only put £12,000 a year into a cash ISA. The overall £20,000 ISA allowance stays, but new rules limit holding cash elsewhere in your ISAs. Here's what's changing and what you can do now.
The short answer
From 6 April 2027, if you're under 65 you'll only be able to pay £12,000 a year into a cash ISA, down from £20,000. Your overall ISA allowance stays at £20,000. If you use the full £12,000 in cash, you can still put the remaining £8,000 into other types of ISA, such as a stocks and shares ISA, but you don't have to. If you're 65 or over, your cash ISA limit stays at £20,000.
Nothing changes for the current 2026/27 tax year. You can still put up to £20,000 into cash ISAs before 5 April 2027, and money already in your cash ISAs stays tax free.
Cash ISA changes from 6 April 2027
HMRC set out the details in a policy paper published on 17 September 2026. The key points are:
- Cash ISA limit for under 65s: £12,000 a year from 6 April 2027
- Cash ISA limit for 65 and over: stays at £20,000, from the start of the tax year in which you turn 65
- Overall ISA allowance: stays at £20,000 across all your ISAs
- Existing cash ISA savings: unaffected. The limit applies to new money you pay in each year
The government's aim is to encourage more long term savings into investments rather than cash. Whether or not you agree with that, it changes how cautious savers need to plan.
New cash ISA transfer and investment rules
You might wonder whether you could put your money into a stocks and shares ISA and simply leave it in cash. HMRC's ISA reform anti-circumvention factsheet covers this. From 6 April 2027:
- No transfers from stocks and shares ISAs into cash ISAs. You'll still be able to move money from a cash ISA into a stocks and shares ISA, but not the other way round. This restriction stops applying from the start of the tax year in which you turn 65, even if your birthday falls later in that year.
- A 22% charge on interest from cash inside non-cash ISAs. Interest paid on cash held in a stocks and shares ISA will face a flat 22% charge. Your ISA provider pays this to HMRC, so you won't need to declare it, but it reduces your return. The Personal Savings Allowance doesn't apply to interest inside an ISA.
- No ISA made up entirely of money market funds. HMRC treats money market funds as cash-like. You can still hold some, but a stocks and shares ISA can't be invested 100% in them.
Shares, funds, investment trusts, ETFs, corporate bonds and gilts don't count as cash-like, so they can still be held in a stocks and shares ISA as normal.
Savings tax rates rise from April 2027
At the same time, tax on savings interest held outside an ISA is going up. From 6 April 2027 the savings tax rates rise to 22% for basic rate taxpayers, 42% for higher rate taxpayers and 47% for additional rate taxpayers.
Your Personal Savings Allowance isn't changing. You can still earn £1,000 of interest tax free as a basic rate taxpayer, or £500 as a higher rate taxpayer, and nothing if you pay additional rate tax. To put that in context, at 4% interest a balance of £25,000 earns £1,000 a year, the full basic rate allowance, before counting any other savings income.
So a smaller cash ISA allowance and higher tax on interest outside ISAs arrive together. For anyone who relies on cash savings, this year's £20,000 cash ISA allowance is worth more than it looks.