Autumn Budget 2025 announces Cash ISA allowance reduction from April 2027

The government has set out the rules that will apply when the Cash ISA subscription limit falls to £12,000 for savers under 65. The change was announced at Autumn Budget 2025 and takes effect from 6 April 2027, within an unchanged overall ISA allowance of £20,000¹. Savers aged 65 and over keep a £20,000 Cash ISA limit, with entitlement applying from the start of the tax year in which someone turns 65¹.

The reduction was confirmed in the Budget 2025 overview of tax legislation, which states that "the annual ISA cash limit will be set at £12,000, within the overall annual ISA limit of £20,000"². The limits for Stocks and Shares ISAs, Innovative Finance ISAs and Lifetime ISAs are unchanged¹. The Treasury Committee had published a report on 25 October 2025 urging the government not to cut the limit; the government response, received on 18 December 2025, restated the policy and noted that savers over 65 "will continue to be able to save up to £20,000 in a Cash ISA each year"⁴.

Alongside the limit, HMRC set out measures intended to stop the lower cap being worked around¹:

The government said the objective is to "incentivise investment in stocks and shares over cash savings and encourage better returns for savers"³. The Building Societies Association said it was "relieved that the reduction to Cash ISAs is less severe than the speculation at the beginning of the year" but "disappointed that the Cash ISA subscription limit has been lowered", adding that it "could also add more complexity, particularly around ISA transfers, and risks damaging the overall ISA brand"⁵.

Why it matters for households

The £20,000 Cash ISA limit has applied since April 2017, when it rose from £15,240⁶. From 6 April 2027, an under-65 saver will be able to put £12,000 into a Cash ISA in a tax year, with the remaining £8,000 of the overall allowance usable in a Stocks and Shares or Innovative Finance ISA¹. The full £20,000 Cash ISA allowance remains available for the 2025-26 and 2026-27 tax years, and unused allowance does not roll over⁶.

The same date brings higher tax rates on savings income outside an ISA: the savings basic rate rises by 2 percentage points to 22%, the higher rate to 42% and the additional rate to 47%². The Personal Savings Allowance does not apply to interest paid within an ISA¹. Which? reported that less than a third (28.5%) of Cash ISA subscriptions were £12,500 or above in 2022-23, with an average subscription of £5,296⁶.

The Treasury has confirmed to Which? that the £4,000 Lifetime ISA limit sits outside the £12,000 Cash ISA limit, so up to £16,000 could be held in tax-free cash savings across the two⁶. Cash held inside a Stocks and Shares or Innovative Finance ISA will still be permitted, but interest on it will attract the 22% charge paid by the ISA manager¹. Transfers from a non Cash ISA into a Cash ISA will not be allowed for under-65s¹.

What happens next

A technical consultation with industry on the draft legislation was to commence shortly after the 23 June 2026 announcement, with regulations to be laid in the Autumn and the rules coming into force on 6 April 2027¹. The Individual Savings Account (Amendment) (No. 2) Regulations 2026 confirm a technical consultation on the draft legislation and operational consequences ran between 25 June and 2 August 2026³. The regulations also provide that the 22% charge does not apply to junior ISAs³. Mandatory monthly digital reporting by ISA managers has been postponed to April 2028².