Changes to the cash ISA limit

The amount most savers can pay into a cash ISA each year is being cut. At Budget 2025 the government announced that, from 6 April 2027, the annual cash ISA subscription limit for individuals aged under 65 falls to £12,000, down from the £20,000 that has applied to every adult since April 2017¹. The overall ISA allowance of £20,000 a year stays exactly where it is, so the change is about how that allowance can be used rather than how much of it exists².

The cut is now law. The Individual Savings Account (Amendment) Regulations 2026 amend the Individual Savings Account Regulations 1998 to set the annual cash ISA subscription limit for investors below the age of 65 at £12,000 from 6 April 2027, while investors aged 65 or over keep the full £20,000³. The government's stated policy objective is to incentivise investment in stocks and shares over cash savings³.

Nothing changes before 6 April 2027. Until that date, savers of every age can continue using their cash ISA as normal, with the current £20,000 allowance⁴. Money already held in a cash ISA keeps its tax-free status, and the new limit applies only to money paid in from April 2027 onwards⁵.

The cash ISA limit falls to £12,000 for under-65s

From 6 April 2027, the start of the 2027/28 tax year, savers under 65 will have a £12,000 cash ISA allowance⁴. The measure works by amending the Individual Savings Account Regulations 1998, the rules that govern how much can be subscribed to each type of ISA in a tax year¹. Regulation 6 of the new regulations introduces the £12,000 limit on subscriptions to cash ISA accounts for individuals under the age of 65⁸.

The limit is an aggregate one. The legislation sets the subscription limit for the aggregate of subscriptions to cash accounts, so paying into two cash ISAs with different providers still counts against the same £12,000, not £12,000 each⁹. The cap sits inside the overall annual ISA limit of £20,000, which is not being reduced³.

The government's reasoning, set out in the explanatory material to the regulations, is that the change is intended to incentivise investment in stocks and shares over cash savings and to encourage better returns for savers³. The Building Societies Association had argued against the cut before it was confirmed, strongly agreeing with a Treasury Select Committee recommendation not to reduce the cash ISA limit, but the government went ahead with the £12,000 figure¹⁰. Ahead of the Budget there had been speculation that the allowance could be reduced, potentially to £10,000, so the £12,000 that was announced was less severe than some reports suggested¹¹.

For most savers the practical effect is modest. HMRC statistics show that the majority of cash ISA savers pay in well below £12,000 a year, and the change bites hardest on those with larger balances to shelter, particularly people who move money between savings accounts to keep interest out of tax¹². The personal savings allowance already lets basic rate taxpayers earn £1,000 of savings interest a year outside an ISA, and higher rate taxpayers £500, so a cash ISA matters most to savers whose interest exceeds those amounts¹².

Who the new limit applies to and who keeps £20,000

The age test in the legislation is precise. The £12,000 limit applies in any year in which a qualifying individual is 64 or under at the end of that year; anyone who is 65 or over at the end of the tax year keeps the £20,000 cash limit⁹. In practice this means that if you turn 65 during a tax year, you are treated as 65 and over for that whole year: entitlement to the higher £20,000 limit applies from the start of the tax year in which an individual turns 65⁶.

The government's explanation for the age distinction is set out in the regulations. In recognition of the need of those approaching retirement to restructure and de-risk their investments, the higher limit and the right to transfer into cash ISAs are retained for this group³. NS&I confirms the position from the saver's side: if you are aged 65 or over, you are unaffected by the change and your cash ISA allowance remains at £20,000⁴.

One point of the age rules deserves attention. The over-65 carve-out covers the higher cash limit and the right to transfer into a cash ISA, but it does not switch off every new rule. The charge on interest earned on cash held in non-cash ISAs, and the prohibition on 100 per cent cash-like investments, remain in place even for individuals aged 65 and over¹³.

Money already in a cash ISA is not affected

The change applies only to new money. NS&I states that the change will only apply to new deposits made from April 2027 and will not have any impact on savings already held⁴. Providers put the same message in their own terms: money already held in a cash ISA remains tax-free and is not affected by the new contribution limit¹⁴. Interest already earned, and interest that continues to be earned on existing balances, keeps its tax-free treatment¹⁵.

This means there is no need to move existing savings out of a cash ISA, and doing so would generally be a mistake. Money withdrawn from an ISA and paid back in as a new deposit counts towards the annual allowance, whereas money that stays put, or moves by transfer between providers, does not use any allowance at all. The guide to how to transfer an ISA explains the process, and taking money out of an ISA covers what withdrawals do to your allowance.

There are no changes before 6 April 2027. Until then, savers can continue to use their cash ISA as normal, with the current £20,000 allowance available to everyone¹⁶. The tax year deadline of 5 April 2027 is therefore the last date on which an under-65 saver can pay in up to £20,000 in a single tax year, and the page on the ISA deadline and the end of the tax year covers what has to be done by then.

Using the rest of the £20,000 allowance: the £8,000 for other ISAs

The overall ISA allowance is not being cut. It stays at £20,000 per tax year, and the government has confirmed it will remain at that level until April 2031¹⁷. What changes is how the allowance can be split. From 6 April 2027, a saver under 65 can pay up to £12,000 into cash ISAs, and the remaining £8,000 of the allowance can go into other types of ISA¹⁸. To use the full £20,000 allowance, the remaining £8,000 would need to be invested in a stocks and shares ISA⁵.

The other ISA types keep their own limits. The limits for Innovative Finance ISAs, Lifetime ISAs and stocks and shares ISAs remain the same⁶. The Lifetime ISA limit is £4,000 a year, which counts within the overall £20,000¹⁹. A saver under 65 could, for example, put £12,000 into cash ISAs, £4,000 into a Lifetime ISA and £4,000 into a stocks and shares ISA, using the full allowance. The guides to stocks and shares ISAs, Lifetime ISAs and Innovative Finance ISAs explain how each one works.

Whether using the remaining £8,000 for investments suits a particular saver is a personal matter. A stocks and shares ISA can fall in value as well as rise, and money in it is not instantly accessible in the way cash is. Which? notes that anyone wanting to use their full ISA allowance will need to invest at least £8,000 in a stocks and shares ISA from April 2027, which makes the question of whether investing suits your circumstances, timeframe and attitude to risk a live one for savers who have previously used only cash²⁰. An emergency fund held in accessible cash is a common starting point before tying money up in investments²¹.

Rules to stop the lower limit being sidestepped

A lower cash ISA limit on its own would be straightforward to get around: a saver could simply put money into a stocks and shares ISA, hold it in cash or in near-cash investments, and enjoy the same tax-free treatment. On 23 June 2026 the government announced a set of anti-circumvention rules designed to minimise the opportunity for the lower cash ISA limit to be circumvented while preserving flexibility for legitimate investment activity within non-cash ISAs³.

The main rules are:

• Transfers into cash ISAs are blocked for under-65s. The rules prevent transfers from non-cash ISAs into cash ISAs for the under-65s²².
• A charge on cash held in non-cash ISAs. A tax charge applies to any interest paid on cash held in a stocks and shares or Innovative Finance ISA, for investors under the age of 65, from 6 April 2027⁷. Which? reports that from April 2027 any cash held in an Innovative Finance ISA that is not currently invested will face a 22% tax charge on the interest earned²³.
• A restriction on money market funds. The rules prevent holding 100% money market funds in non-cash ISAs²².

The Building Societies Association commented on the announcement, noting that the government had taken steps to prevent stocks and shares ISAs being used to circumvent the reduced cash ISA limit²⁴. The government's own summary of the rules describes their purpose as being to support the change to the cash ISA limit²².

For savers, the practical message is that there is no wrapper that replicates a cash ISA for under-65s from April 2027. Holding uninvested cash inside a stocks and shares ISA to shelter interest will trigger the charge, and piling entirely into money market funds to mimic cash is blocked. The rules apply to England, Scotland, Wales and Northern Ireland alike, as ISA rules are UK-wide.

Transfers from stocks and shares ISAs to cash ISAs

The transfer restriction is the anti-circumvention rule most likely to catch savers out. From 6 April 2027, transfers from a stocks and shares ISA or an Innovative Finance ISA to a cash ISA are prohibited where the account holder is below the age of 65³. Transfers in the other direction, from a cash ISA to a stocks and shares or Innovative Finance ISA, remain possible⁶.

The age carve-out works in the same way as the allowance itself. A transfer of funds from a stocks and shares or Innovative Finance ISA to a cash ISA can only take place where the account investor is aged 65 or over at the end of the year in question, and the restriction is disapplied for those aged 65 and over from the start of the tax year in which they turn 65⁶.

This is a genuine change of direction for ISA rules. Historically, funds invested in a stocks and shares ISA could only be transferred to another stocks and shares ISA, while cash ISA funds could move to a stocks and shares ISA or another cash ISA²⁵. The new rule keeps the cash-to-investments route open and closes the investments-to-cash route for under-65s. Which? puts the reason plainly: without a ban on transfers from stocks and shares ISAs to cash ISAs, people would otherwise be able to sidestep the reduced limit²⁶.

Two practical points follow. First, transfers between providers of the same type, such as cash ISA to cash ISA, are unaffected and never use any of your annual allowance, as the guide on whether transferring uses your allowance explains. Second, withdrawing money from a stocks and shares ISA and paying it into a cash ISA as new money is not a transfer: it counts as a fresh subscription against the £12,000 limit, and any gains realised on withdrawal may lose tax-free status. The page on transfer an ISA or withdraw and reinvest sets out the difference.

Flexible cash ISAs and replacing withdrawals

Flexible ISAs let a saver withdraw money and put it back into the same account, in the same tax year, without the repayment eating into their annual allowance¹⁵. Not every provider offers flexibility, and the feature belongs to the account rather than to ISAs generally: Halifax, for example, describes its ISA Saver Variable as a flexible ISA in which withdrawn money can be paid back in before the end of the tax year without affecting the allowance²⁷.

The new regulations change one detail of how flexibility interacts with the lower limit. The legislation amends the flexible ISA rules so that any replacement of funds to a cash ISA must not exceed the cash subscription limit³. In other words, from April 2027 an under-65 saver with a flexible cash ISA can still withdraw and replace money freely, but the replacement payments count towards the £12,000 cash limit in the normal way, and the total subscribed to cash cannot exceed it.

This matters most in the transition year. A saver who withdraws money from a flexible cash ISA in the 2026/27 tax year and repays it before 5 April 2027 does so under the current rules. The same withdrawal repaid after 6 April 2027 falls into the new tax year and the new limit, so the timing of a planned repayment can change how much allowance it uses. The guide to flexible ISAs explains the mechanics in full.

How the cash ISA limit has changed over time

The cash ISA limit has moved several times over the past two decades, and the direction of travel has almost always been upwards until now. HMRC's savings statistics record the limits for each tax year: in 2009 to 2010 the cash limit was £3,600, or £5,100 for those aged 50 and over, within an overall limit of £7,200 or £10,200²⁵. By 2013 to 2014 the cash limit was £5,760 within an overall limit of £11,520²⁵.

The big simplification came on 1 July 2014, when all ISAs became New ISAs and the annual subscription limit was increased to £15,000, which could be saved in cash, in stocks and shares, or in any combination of the two²⁵. At the same time the previous rule that only half the allowance could go into cash was abolished, so savers could put the whole amount into cash for the first time²⁸. In April 2017 the overall ISA limit rose to £20,000, where it has stayed ever since²⁹.

The 2027 change is the first cash ISA limit cut in the wrapper's history, and it is also the first time the limit has varied by age since the over-50s uplift of 2009 to 2010²⁵. The government has confirmed that the overall £20,000 ISA limit will remain until April 2031, so the shape of the allowance, a £12,000 cash cap inside a £20,000 total for under-65s, is set to persist for several years¹⁷. The page on ISA allowances in past tax years gives the year-by-year figures.

Other rules that stay the same

Most of the ISA rules savers have got used to since April 2024 are untouched by the change. You can still open and pay into more than one ISA of the same type in a tax year, including several cash ISAs with different providers, as long as the total paid in across all of them does not exceed your overall limit³¹. The total counts as one allowance: paying into cash ISAs with multiple providers is fine, but the combined subscriptions must stay within £12,000 for under-65s from April 2027¹⁵. Individual providers may set their own restrictions, and some only allow you to pay into one cash ISA with them even though the rules allow more²⁷.

Unused allowance still cannot be carried over. ISA allowance does not roll into the next tax year, and the allowance resets every 6 April³². Any part of the £12,000 not used by 5 April 2027, or of the £20,000 not used before then, is lost.

The Junior ISA is unaffected. Its subscription limit is £9,000 a year, and the government has confirmed that annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2031¹⁷. The Junior ISA limit has its own history, having risen from £4,128 to £4,260 in April 2018 before later reaching £9,000³³. The guides to Junior ISAs and how much can go in a Junior ISA cover the details.

Lifetime ISA rules also stand. The £4,000 Lifetime ISA limit counts within the overall £20,000, and transfers from a Help to Buy ISA made in the 2017 to 2018 tax year were able to move across without counting towards it, a transitional arrangement from when the Lifetime ISA launched¹⁹. The Lifetime ISA government bonus and its withdrawal charges are unchanged by the cash ISA cut, as the pages on the Lifetime ISA and the withdrawal charge explain.

What savers can do before the change

Nothing needs to be done, and nothing is lost by doing nothing, but the period before 6 April 2027 is the last in which an under-65 saver can subscribe up to £20,000 to cash ISAs in a single tax year. Some savers may choose to use the current allowance in full before the deadline, and the 2026/27 tax year ending 5 April 2027 is the final one under the old rules¹⁶. Fixed rate cash ISAs opened before the change keep their terms, and the guide to fixed rate cash ISAs explains how they behave at maturity.

A few points are worth weighing. Which? has looked at whether fixing your ISA before the change beats the allowance cut, and at whether taking a lower savings rate to reduce a tax bill makes sense, and both questions turn on individual circumstances rather than on the new rules themselves⁵. An emergency fund held in accessible cash is a common priority before tying money up in fixed terms or investments²¹. Spreading savings across the tax year, or across a savings ladder of different terms, is another approach savers take³⁴.

What is not worth doing is trying to outmanoeuvre the rules. Withdrawing money from an ISA to hold outside the wrapper loses its tax-free status on future interest, and paying it back in uses allowance. Withdrawing from a stocks and shares ISA to move value into a cash ISA realises any gains and counts as a fresh cash subscription²⁶. Holding uninvested cash inside an Innovative Finance ISA attracts the 22% charge on interest from April 2027, and Which? warns against withdrawing money from other ISAs to transfer, as it can affect your current ISA allowance²³. Mistakes like these are among the common errors savers make when trying to lower their tax bill²⁰.

Where savers want help, free impartial guidance is available from MoneyHelper, and the rules on what is and is not tax free inside an ISA are set out in the guide to ISAs and tax. If a subscription breaks the rules, for example by exceeding the limit, the page on invalid subscriptions explains what happens.