The UK government has confirmed that from April 6, 2027, the Cash ISA allowance for savers under the age of 65 will be reduced to £12,000, down from the current maximum of £20,000 per tax year. The change, announced earlier this year, will affect more than 14 million people in the UK who hold a Cash ISA.
The tax year runs from April 6, 2026, to April 5, 2027. Under the new rules, the maximum amount that can be saved in a Cash ISA will decrease by £8,000 for those under 65. Savers will be able to move the remainder of their savings into a Stocks and Shares ISA, but any interest earned on that cash will be taxed at 22%.
New ISA limits and government advice
The key advantage of ISAs is that interest earned on savings remains free from tax. However, working-age savers are set to lose some of the benefits they currently enjoy. Advice on the government website reads: "The new cash ISA limit for those under 65 will be £12,000. The limits for Innovative Finance ISAs, LISAs and Stocks and Shares ISAs will remain the same."
The government's main aim is to encourage young people to invest more. Money Saving Expert website said: "The Government hopes the change – the first cut to the cash ISA allowance since 2017 – will encourage more people to invest in stocks and shares instead."
Impact on existing savings
The 22% tax on interest will only apply to new contributions made from April 2027. It will not have any impact on savings already contributed to a Cash ISA up until that point.
The Chancellor, John Healey, is expected to share more information on the changes at the Budget on Wednesday, October 28, when he will present his plans for the UK economy to the House of Commons. The Autumn Budget will take place from the House of Commons, and can be watched from 12:30pm on BBC iPlayer, following Prime Minister's questions.
The Chancellor has said the Budget will move "money and power out of Westminster, and into every postcode around Britain". He has also said that the Budget will meet the fiscal rules, control borrowing to lower inflation, and reduce long-term pressures on the public finances. He said the Budget will include plans "to give families and businesses a bit of breathing space" following the rise in prices since the start of the current Israel/US conflict with Iran.
