Cash ISA rules will change under Andy Burnham's government, with over-65s and state pensioners retaining the full £20,000 annual cash deposit limit while the standard limit is cut to £12,000 from April 2027.
The changes were first devised by former Chancellor Rachel Reeves and are expected to proceed as planned under Burnham and his Chancellor of choice John Healey. The reform is one of Reeves' most significant decisions during her tenure at the Exchequer.
New limits from April 2027
Cash ISA limits will be cut to just £12,000, down from their current £20,000, as of April 2027. However, the new rules will not apply to those aged over 65, with special rules keeping the current £20,000 Cash ISA annual deposit limit in place specifically for state pensioners and those aged over 65.
The State pension age is 66, rising to 67, which means all state pensioners will be eligible for the new Cash ISA protections, as well as those aged 65 and over who have not yet hit state pension age.
Reeves' ISA reform
In her Autumn Budget, Reeves finally announced a long anticipated and much feared cut to Cash ISAs, despite objections from prominent financial campaigners like Martin Lewis. Under the new rules, savers will still be able to put £20,000 a year into tax-free ISAs like they can now, but Cash ISAs will be limited to just £12,000, instead of the full £20,000.
Those wanting to use the full £20,000 allowance will have to put the other £8,000 into a Stocks and Shares ISA instead. But state pensioners will be allowed to keep the full cash allowance, Reeves said in her speech.
Online hubs and market reaction
Cash ISAs, which allow savers to put money away and hide it from tax each financial year, have been the subject of scrutiny. At one point, rumours suggested the limit could be set as low as £10,000.
Online hubs will be set up, designed "to help people invest" in the UK, Reeves said as she set out reforms to the ISA system. The Chancellor told MPs: "From April 2027, I will reform our Isa system, keeping the full £20,000 allowance while designating £8,000 of it exclusively for investment, with over-65s retaining the full cash allowance.
"And thanks to our changes to financial advice and guidance, banks will be able to guide savers to better choices for their hard-earned money.
"Over 50% of the Isa market – including Hargreaves Lansdown, HSBC, Lloyds, Vanguard and Barclays – have signed up to launch new online hubs to help people invest here in Britain."
Savers who would usually exceed that amount will need to find alternatives before the change is put in place, such as using Stocks and Shares ISAs, but the change will not affect existing deposits.
Burnham's continuity plan
Burnham's Chancellor John Healey has not yet revealed the full extent of his spending plans - or their costings. The Chancellor is under mounting pressure from gilt and bond markets as the cost of the US action in the Middle East starts to impact the UK's cost of borrowing, reducing vital headroom.
However, the Chancellor is not expected to pull the plug on Reeves' ISA plans, which are still scheduled to go into effect from April 6, 2027. In an interview with Sky, Healey stressed that he wanted 'continuity' with the previous PM and Chancellor's policies.
