Cash ISA limits will drop to £12,000 from April 2027, but state pensioners and over-65s will keep the full £20,000 annual allowance under rules confirmed to proceed as planned by HM Treasury.
The change, first devised by former Chancellor Rachel Reeves, will go ahead under Andy Burnham and his new Chancellor of choice, John Healey. It gives a boost to all state pensioners, who will be exempt from the reduced limit.
New limits from April 2027
Cash ISA limits will be cut to just £12,000, down from their current £20,000, as of April 2027. Savers will still be able to put £20,000 a year into tax-free ISAs, but Cash ISAs will be limited to £12,000. Those wanting to use the full £20,000 allowance will have to put the other £8,000 into a Stocks and Shares ISA instead.
The new rules will not apply to state pensioners or those aged over 65, with special rules keeping the current £20,000 Cash ISA annual deposit limit in place. The state pension age is 66, rising to 67, which means all state pensioners will be eligible for the protections, as well as those aged 65 and over who have not yet hit state pension age.
Reeves' announcement
In her Autumn Budget, Reeves announced the long anticipated and much feared cut to Cash ISAs, despite objections from prominent financial campaigners like Martin Lewis. At one point, rumours suggested the limit could be set as low as £10,000.
Reeves told MPs: "From April 2027, I will reform our Isa system, keeping the full £20,000 allowance while designating £8,000 of it exclusively for investment, with over-65s retaining the full cash allowance."
She added: "And thanks to our changes to financial advice and guidance, banks will be able to guide savers to better choices for their hard-earned money. Over 50% of the Isa market – including Hargreaves Lansdown, HSBC, Lloyds, Vanguard and Barclays – have signed up to launch new online hubs to help people invest here in Britain."
Impact and next steps
Savers who would usually exceed that amount will need to find alternatives before the change is put in place, such as using Stocks and Shares ISAs, but the change will not affect existing deposits.
Burnham's Chancellor John Healey has not yet revealed the full extent of his spending plans or their costings, but the Budget is coming in just two weeks, on October 28. The Chancellor is under mounting pressure from gilt and bond markets as the cost of US action in the Middle East starts to impact the UK's cost of borrowing, reducing vital headroom.
However, the Chancellor is not going to pull the plug on Reeves' ISA plans, which are still scheduled to go into effect from April 6, 2027, according to the Treasury.
