A major change to tax-free savings accounts in the UK is not well understood, according to a new report. The upcoming Cash ISA shake-up, introduced by former Chancellor Rachel Reeves, could create a significant generational divide in how savers use their ISA allowance.
Research from Raisin UK's Great British Savings Report 2026 found that two-thirds (66%) of 25-34-year-old Cash ISA users say they are likely to start or increase Stocks & Shares ISA use, compared with just 27% of those aged 55 and over.
How ISAs are changing from 2027
From April 6, 2027, people under 65 will be able to put up to £12,000 a year into Cash ISAs, down from the current £20,000. However, they will still be able to save or invest up to £20,000 a year across all types of ISA combined. In practice, that means up to £12,000 could go into Cash ISAs, with the remaining allowance available for other ISA types, such as Stocks & Shares ISAs. Savers aged 65 and over will retain the full £20,000 Cash ISA limit.
The reforms are intended to encourage greater retail investment, but Raisin UK's findings suggest some savers may be considering how to respond before they fully understand what is changing. Fewer than one in five UK adults (18%) say they understand how Cash ISAs work, including the new £12,000 limit. Yet among current Cash ISA users, almost half (44%) say they are likely to start or increase their use of a Stocks & Shares ISA following the change.
That willingness is strongest among younger savers. Almost two-thirds (63%) of 18-24-year-old Cash ISA users and two-thirds (66%) of 25-34-year-olds say they are likely to start or increase Stocks & Shares ISA use. That falls steadily with age, to 52% among 35-44s, 44% among 45-54s and just 27% among those aged 55 and over. That means 25-34-year-old Cash ISA users are more than twice as likely as over-55s to say they may increase or begin using a Stocks & Shares ISA following the reform.
Gap in understanding
Kevin Mountford, personal finance expert and co-founder of Raisin UK, said: "The most striking finding is not simply that younger Cash ISA users appear more open to investing. It is that this willingness sits alongside a significant understanding gap around what is actually changing.
"That matters because moving from cash into investments is not just an administrative decision about where to place an ISA allowance. Cash and investments do different jobs. Money someone may need in the short term generally needs certainty and accessibility, while investing is usually better suited to longer-term goals and comes with the possibility that the value can fall as well as rise.
"The age divide also shows why there cannot be a one-size-fits-all response to the reforms. A younger saver with a longer time horizon may feel more comfortable considering investments, while someone approaching or in retirement may place greater value on certainty and access.
"The priority before April 2027 should therefore be clarity. Savers need to understand what the new limit means, what options remain available to them and the trade-offs between cash and investing before deciding how to use their allowance."
Cash ISA appeal continues
The research also shows why Cash ISAs continue to appeal. Among people who have heard of them, a competitive interest rate (23%) is the most commonly selected factor that would make a Cash ISA more attractive, followed by access to money when needed (18%) and knowing the interest is tax-free (17%). That suggests the reform creates a new decision point for savers rather than a simple choice between cash and investments. For some, retaining accessible cash while considering longer-term money separately may be appropriate; for others, the certainty of cash may remain the priority.
From April 2027, new rules will also limit how under-65s can move money between different types of ISA, while cash held inside non-Cash ISAs will face a 22% tax charge on the interest earned. The findings form part of Raisin UK's Great British Savings Report 2026, its annual barometer of how Britain saves and the financial behaviours shaping the nation.
