New rules confirmed by Andy Burnham's government will cut the Cash ISA limit from £20,000 to £12,000 for anyone under 65, starting from April 6, 2027. HM Revenue and Customs (HMRC) has published further details on the change, which was first announced by former chancellor Rachel Reeves during Sir Keir Starmer's premiership.
ISAs, or Individual Savings Accounts, allow savers to put money away without paying tax on the interest earned. Adults can hold four types of ISA – cash ISAs, stocks and shares ISAs, innovative finance ISAs and Lifetime ISAs – plus a Junior ISA for children under 18.
How the new limit works
Under current rules, all adult savers have an overall ISA limit of £20,000 per tax year, which can be split between different ISA types. There is currently no limit on how much of that allowance can be held in Cash ISAs, but that changes next year.
From April 6, 2027, savers under 65 will only be able to put away £12,000 in a Cash ISA. The £20,000 overall limit remains, meaning savers with the maximum £12,000 in a Cash ISA can still put another £8,000 into other ISAs. The new limit does not apply to people aged 65 and over, who keep the full £20,000 overall allowance.
HMRC said the move is intended to encourage people to “allocate a greater proportion of their ISA savings to stocks and shares ISAs or to other qualifying investments”.
Additional ISA rule changes
Alongside the new Cash ISA limit, HMRC will introduce other rules affecting how savers use their ISAs. Savers will not be able to transfer money from a non-cash ISA into a cash ISA, but can still transfer funds from a cash ISA into a non-cash ISA. To prevent people holding cash in an investment ISA, HMRC will charge a flat rate of 22 per cent on any interest earned on cash held in a non-cash ISA.
Earlier this month, HMRC data showed that £95.58 billion was subscribed into adult cash ISAs in the tax year 2024-25 – a figure up by more than a third compared with the previous year. Overall, around £135.7 billion was subscribed to adult ISAs in 2024-25, a £32.7 billion annual increase, driven by a 37.5 per cent rise in cash ISA subscriptions.
The report said: “This large increase in cash ISA subscriptions can be explained by the Bank of England bank rate and the interest swap rates which were at their highest levels during the 2023-24 and 2024-25 tax years. Increased returns to savings are likely to have increased the attractiveness of Isas as a means to reduce savings income tax liabilities.”
Reaction from investment experts
Isabella Galliers-Pratt, a senior investment director at Rathbones, said the figures show that cash ISAs “remain firmly embedded in the nation’s savings habits”, while there are also encouraging signs that “more people are engaging with investing”.
She said: “Millions of people are actively using Isas and taking advantage of the tax benefits they offer. The upcoming reduction in the cash ISA allowance from £20,000 to £12,000 for under-65s could help nudge some savers towards investing, but whether it materially changes behaviour remains to be seen.
“Cash remains hugely popular, and our research suggests that confidence and understanding, rather than tax incentives alone, are often the biggest barriers to investing.”
