The government has announced a series of changes to cash ISA rules, set to take effect from April 2025, which will primarily impact savers under the age of 65. The most significant alteration is the reduction of the cash ISA allowance from £20,000 to £12,000, a measure first unveiled in the previous year's Budget. However, under current proposals, individuals born before 1962—those who will be 65 or older by the time the rules come into force—may be exempt from these restrictions.
Key Changes for Under-65s
From April 2025, savers under 65 will face two major restrictions: the cash ISA limit will be cut from £20,000 to £12,000, and transfers from non-cash ISAs (such as stocks and shares ISAs) to cash ISAs will no longer be permitted. According to MoneySavingExpert, the government is consulting on proposals that would reverse these rules for individuals from the start of the tax year in which they turn 65. For example, someone born in May 1963 would turn 65 in May 2028, and their £20,000 limit would be restored from April 2028.
Protections for Older Savers
The exemption for those aged 65 and over is designed to allow older savers to protect their cash from investment risks. However, new rules under consultation will still apply to all ages, including those over 65, to prevent misuse of non-cash ISAs as cash equivalents after the allowance change. These include a 22% charge on interest earned from cash held in non-cash ISAs, a restriction that Money Market Funds (MMFs) can be held as investments only if they do not constitute 100% of the non-cash ISA's value, and a definition of 'cash-like assets' as Money Market Funds.
Other ISA Limits Unchanged
While the cash ISA allowance is being reduced, other ISA limits remain the same: £20,000 for stocks and shares ISAs, £20,000 for innovative finance ISAs, £4,000 for Lifetime ISAs, and a £20,000 overall annual ISA limit. Additionally, the government has revealed it is considering replacing the Lifetime ISA with a First-Time Buyer ISA, though further details are pending.
