Tax information and impact note published on cash ISA limit reduction

HM Revenue & Customs published a tax information and impact note on 17 September 2026 setting out changes to the Individual Savings Account Regulations 1998 that reduce the annual cash ISA subscription limit to £12,000 for individuals aged under 65 from 6 April 2027¹. The note states that for investors aged 65 or over the annual cash ISA limit will remain at £20,000².

The measure was announced at Budget 2025, when the government said the annual cash ISA subscription limit for individuals aged under 65 would be reduced to £12,000 within the overall ISA subscription limit of £20,000, and that individuals aged 65 and over would continue to be able to save up to £20,000 annually in a cash ISA². The ISA Regulations currently provide a single overall annual ISA subscription limit of £20,000 and do not provide for separate cash ISA subscription limits based on age². The operative date for the change is 6 April 2027².

The note also sets out anti-circumvention rules, announced on 23 June 2026, which it says are required to support the policy². These include restrictions on transfers from stocks and shares ISAs and Innovative Finance ISAs into cash ISAs, a flat rate charge of 22% on any interest paid on cash held in non-cash ISAs, rules relating to Money Market Funds, and additional reporting requirements for ISA managers². The government has deferred the implementation of ISA Digitalisation to April 2028 to allow ISA managers to focus on implementing the new ISA rules².

The note gives estimated business costs: a one-off transitional cost of £6.0 million for ISA managers, and an ongoing impact on transitional business costs of £0.2 million². It says HMRC will need to implement changes to its IT systems, with current estimates placing these at around £0.2 million, forming part of the wider Digitalisation of ISAs programme². The Exchequer impact table in the note is empty, and it states the final costing will be subject to scrutiny by the Office for Budget Responsibility².

On who is affected, the note says the measure is expected to affect individuals aged 64 or under who currently subscribe more than £12,000 annually to a cash ISA, and individuals who hold cash or Money Market Funds within stocks and shares ISAs or Innovative Finance ISAs². It reports that in 2022 to 2023, 78% of cash ISA subscribers aged under 65 subscribed less than £12,000 to a cash ISA and 22% subscribed over £12,000².

Source: Cash Individual Savings Account (ISA) limit reduction, GOV.UK²

Why it matters for households

From 6 April 2027, savers aged under 65 will be able to put up to £12,000 a year into a cash ISA, down from the current £20,000, while the overall ISA allowance stays at £20,000². The note says those affected may need to adjust how they allocate funds between cash ISAs and non-cash ISAs and the type of investments they hold in a stocks and shares ISA². Savers aged 65 and over keep a £20,000 cash ISA limit².

The anti-circumvention rules also touch people who hold cash inside a stocks and shares ISA or an Innovative Finance ISA: a flat rate charge of 22% applies to any interest paid on cash held in non-cash ISAs, and there are restrictions on transfers from non-cash ISAs into cash ISAs². The note says the measure is expected to encourage individuals affected by the reduced limit to allocate a greater proportion of their ISA savings to stocks and shares ISAs or other qualifying investments, and that the scale of this reallocation is not expected to have a significant macroeconomic impact².

The note sets out equalities estimates: individuals aged 55 to 64 and those aged 65 or over are estimated to be overrepresented among cash ISA subscribers (18% and 34% respectively) compared with their prevalence in the UK adult population (17% and 24%)². It also estimates females at 53% of cash ISA subscribers against 50% of the adult population, individuals from a White English, Welsh, Scottish, Northern Irish or British ethnic background at 90% against 82%, individuals with a disability at 37% among cash ISA subscribers aged 65 and over against 26%, and individuals of the Christian faith at 74% against 52%².

What happens next

The measure takes effect from 6 April 2027². The government has deferred the implementation of ISA Digitalisation to April 2028². The note states the measure will be monitored through information provided by ISA managers, existing ISA reporting returns and ongoing stakeholder engagement². The final costing is subject to scrutiny by the Office for Budget Responsibility².