Working-age savers will see the annual cash ISA allowance cut from £20,000 to £12,000 from April 2027, a change expected to be reiterated in the upcoming Budget. The reduction, previously announced by former Chancellor Rachel Reeves, will apply to savers under 65, while pensioners will retain the full £20,000 limit.
What the ISA rule change means
Under the new rules, working-age savers will be able to place up to £12,000 into cash ISAs each year, reducing the amount of tax-free interest they can earn. The remaining £8,000 of the overall ISA allowance can still be placed in stocks and shares accounts, but any interest earned on that cash will be subject to a 22% charge.
The change is designed to encourage more investment in stocks and shares, helping to boost the economy. The overall ISA allowance will remain at £20,000.
Reaction from analysts and consumer groups
Rob Morgan, chief investment analyst at investment and finance platform Charles Stanley Direct, said: "From April 2027, the annual cash ISA allowance will be cut from £20,000 to £12,000 for those under 65, while the overall ISA allowance will remain at £20,000. Older savers will retain the full £20,000 cash allowance."
Consumer information website MoneySavingExpert said: "Savers who hold cash inside stocks and shares ISAs will be charged 22% on any interest earned on that cash from April 6, 2027, the Government has confirmed. The charge is designed to stop people using investment ISAs as a workaround to hold cash when the cash ISA limit is cut from £20,000 to £12,000 a year for under-65s from the same date."
The new rules will affect millions of savers who use cash ISAs for tax-free interest, with the details expected to be confirmed at the Budget on Wednesday.
