A series of cash ISA rule changes will take effect from April 2026, with most updates designed to encourage more people to invest rather than keep money in cash accounts. The most significant change is a reduction in cash ISA allowances from £20,000 to £12,000, announced in last year's Budget. However, new rules and updates are currently being consulted on to close potential loopholes and clarify how the changes will apply based on age.
Who Is Affected by the New Cash ISA Rules?
Many of the new rules will only affect those aged under 65. As the changes come into force next April, this means everyone born after 1962 will initially be impacted. According to MoneySavingExpert, the government is currently proposing that from the start of the tax year in which you turn 65, both the allowance reduction and transfer restrictions will be reversed.
For example, if you were born in May 1963, you will turn 65 in May 2028. This means your £20,000 limit would be restored from April 2028, the start of the tax year in which you reach that milestone. The rule is intended to allow older savers to shield their cash from the risks associated with investment.
Key Changes for Under-65s
- Cash ISA limit cut from £20,000 to £12,000
- No longer able to transfer money from non-cash ISAs to a cash ISA
Additional Rules for All Ages
There are some new potential rules being consulted on that will still apply to people over the age of 65. These additional rules have been put in place to prevent people from using non-cash ISAs like cash ISAs after the new allowance limit starts. This includes:
- 22% charge on interest made for cash held in non-cash ISAs
- Money Market Funds can be held as investment if they don’t make up 100% of the non-cash ISAs value
- ‘Cash-like assets’ will be defined as Money Market Funds
Other ISA Limits Unchanged
The other annual limits for ISAs will remain the same. These are currently:
- £20,000 for stocks and shares ISAs
- £20,000 for innovative finance ISAs
- £4,000 for Lifetime ISAs
- £20,000 for the overall annual ISA limit
In addition, the Government has revealed this week that it is considering replacing the Lifetime ISA with a First-Time Buyer ISA, though further details on this proposal are yet to be announced.
