The Treasury has clarified how new ISA allowance changes will affect savers, confirming that those aged 65 and over will retain the current £20,000 annual limit, while others will face restrictions and higher taxes on savings interest.
Changes from April 2027
As announced in the Autumn Budget 2025, the government is altering ISA rules. Currently, savers can deposit up to £20,000 per year into ISAs, splitting it between cash and stocks and shares as they wish. From April 2027, only £12,000 of that allowance can be used freely; the remaining £8,000 will be restricted to investment-based accounts.
However, anyone aged 65 or over will be exempt from these restrictions and will keep the full £20,000 allowance. An HMRC factsheet states: "Individuals aged 65 and over will benefit from a higher Cash ISA limit of £20,000, entitlement to which will apply from the start of the tax year in which an individual turns 65." This means anyone born before April 1963 will qualify, as they will turn 65 during the 2027-28 tax year.
Why the age carve-out?
The exemption aims to give older savers more flexibility in managing their savings as they approach retirement. However, the choice of 65 has been questioned because it does not align with other key ages in retirement planning. For example, the state pension age is rising from 66 to 67 between 2026 and 2028, and the private pension access age will increase from 55 to 57 in April 2028. The state pension age is also scheduled to rise from 67 to 68 between 2044 and 2046.
Asked why 65 was chosen, an HM Treasury spokesperson said: "These reforms are designed to encourage more people to benefit from the better long-term returns that investing can offer while continuing to support savers. We introduced an age carve-out for those aged 65 and over in recognition that people approaching retirement may need greater flexibility in how they manage their savings."
Higher savings tax rates
In addition to ISA changes, savings interest tax rates will increase by two percentage points from April 2027, affecting all tax bands. Basic rate taxpayers will see their rate rise from 20% to 22%, higher rate from 40% to 42%, and additional rate from 45% to 47%.
