HM Revenue and Customs (HMRC) has confirmed new ISA rules affecting people under 65 will come into force from April next year. The changes form part of reforms to Individual Savings Accounts (ISAs) taking effect on April 6, 2027, including the introduction of a new £12,000 annual Cash ISA limit for people aged under 65.
The overall annual ISA allowance will remain at £20,000, but under-65s will only be able to put up to £12,000 of that amount into Cash ISAs. HMRC has now set out additional rules designed to prevent savers from using other types of ISA to get around the lower cash limit.
New restrictions on transfers and charges
The Individual Savings Account (Amendment) (No. 2) Regulations 2026 were laid before Parliament on September 14 following the closure of a technical consultation. One of the changes will prevent investors aged under 65 from transferring money from a Stocks and Shares ISA or Innovative Finance ISA into a Cash ISA.
Another will introduce a flat-rate charge on interest or alternative finance returns paid by providers on cash held within Stocks and Shares and Innovative Finance ISAs. The charge will be set at the savings basic rate. HMRC said the regulations also include a rule preventing investments within a Stocks and Shares ISA from consisting entirely of money market funds.
Changes made following consultation
The UK Government has made several changes to its original proposals following feedback received during its technical consultation. Junior ISAs will be exempt from the restriction preventing investments from consisting entirely of money market funds.
The UK Government has also removed proposed “purpose rules” governing cash held within non-Cash ISAs. Another change concerns responsibility for the new flat-rate charge when an ISA is transferred between providers. HMRC said the existing ISA manager will be responsible for accounting for any charge up to the date of the transfer, rather than having to inform the new provider of an outstanding amount.
HMRC said it will continue working with ISA managers and industry bodies ahead of the reforms and will publish updated guidance for ISA providers before the changes take effect on April 6.
Cash ISA allowance from April 2027
The reforms mean someone aged under 65 will still have an overall £20,000 ISA allowance in the 2027/28 tax year, but no more than £12,000 can be subscribed to Cash ISAs. The remainder of their allowance could instead be used for other eligible types of ISA.
The new £12,000 restriction applies specifically to people under 65. The HMRC newsletter does not announce a reduction in the Cash ISA allowance for people aged 65 and over. The changes will apply from the beginning of the new tax year on April 6, 2027.
