Cash ISA limit falls to £12,000 in April 2027, but not if you are 65
HMRC has published the detail: the cash ISA limit falls to £12,000 for under-65s from 6 April 2027, while savers aged 65 and over keep £20,000.
The annual cash ISA subscription limit drops to £12,000 for savers aged under 65 from 6 April 2027. Anyone 65 or over keeps the full £20,000. The overall £20,000 ISA allowance is unchanged - the cut moves where it can go, not how much there is.
- Effective from
- 6 April 2027
- Who it affects
- Cash ISA savers aged under 65 who pay in more than £12,000 a year - 22% of them in the last published year
The amending regulations, the Individual Savings Account (Amendment) (No. 2) Regulations 2026 (SI 2026/1018), were made on 10 September 2026 and laid before the House of Commons on 14 September; HMRC’s impact note followed on 17 September 2026. From 6 April 2027 the annual cash ISA subscription limit falls to £12,000 for anyone who is 64 or under at the end of the tax year. Savers who are 65 or over at the end of the tax year keep the full £20,000.
The change was announced at Budget 2025 and the accompanying anti-circumvention rules on 23 June 2026. What is new is the detail of how it will work, and some of that detail has had very little attention.
What actually changes
| Now, and through 2026/27 | From 6 April 2027 | |
|---|---|---|
| Overall ISA allowance | £20,000 | £20,000 - unchanged |
| Cash ISA, under 65 | £20,000 | £12,000 |
| Cash ISA, 65 and over | £20,000 | £20,000 |
The overall allowance does not move. HMRC’s wording is that the change reduces the cash limit “while retaining the overall ISA subscription limit of £20,000”. So a 40-year-old saver still has £20,000 of ISA room in 2027/28 - at most £12,000 of it can sit in cash, and the remaining £8,000 has to go into a stocks and shares ISA, an Innovative Finance ISA, or a Lifetime ISA within its own £4,000 cap.
The stated objective is explicit: the government wants “greater retail investment”, on the reasoning that “historical trends suggest” it “provides better returns for savers”.
Who this actually hits
Far fewer people than the headline suggests. HMRC’s own impact note gives the figure: in 2022 to 2023, 78% of cash ISA subscribers aged under 65 paid in less than £12,000, and 22% paid in more.
So roughly one cash ISA saver in five is affected, and only to the extent they were paying in above £12,000. Someone putting £500 a month into a cash ISA is nowhere near the new limit.
The part nobody is talking about: a 22% charge on cash inside a stocks and shares ISA
The anti-circumvention rules are the substantive part of this measure, and they reach further than the headline cut.
From 6 April 2027 the regulations introduce:
- A flat rate charge on interest and alternative finance returns paid on cash deposits held in a stocks and shares ISA or an Innovative Finance ISA (new regulation 22A). The ISA manager pays it to HMRC, at the savings basic rate for the year: 22%, in HMRC’s note.
- Restrictions on transfers from stocks and shares ISAs and Innovative Finance ISAs into cash ISAs: allowed only if the saver is 65 or over at the end of the tax year, to stop subscriptions being routed through a non-cash ISA first.
- A rule for Money Market Funds: they become a named qualifying investment for both cash and stocks and shares ISAs, but a stocks and shares ISA’s investments other than cash must not be 100% Money Market Funds. The 22% charge does not apply to them; it is a charge on cash deposits.
- Additional reporting requirements for ISA managers.
The logic is visible in HMRC’s own framing: the rules exist so the limit “cannot be circumvented, for example, by holding large cash balances or cash-like products within non-cash ISAs”.
That has a consequence worth planning around now. A stocks and shares ISA holding a large uninvested cash balance is a common and often sensible position - money waiting to be deployed, or a deliberate cash allocation. From April 2027 the interest on it is charged at 22% inside the wrapper. Money Market Funds, which many investors use as a cash-like holding, are treated differently: they are not caught by the charge, but a stocks and shares ISA can no longer hold nothing but them.
What to do before April 2027
Nothing urgent, and nothing this tax year is affected. The 2026/27 allowance is £20,000 with no separate cash limit, so a cash ISA can still take the whole of it until 5 April 2027.
Three things are worth thinking about:
- If you are under 65 and regularly max a cash ISA, 2026/27 is the last year you can put £20,000 of it in cash. Whether to use that is a question about your own time horizon, not a tax question.
- The age test is your age on the last day of the tax year. If you will be 65 or over on 5 April 2028, the £20,000 cash limit applies to you for the whole of 2027/28, even if you are 64 when you pay in.
- If you hold cash inside a stocks and shares ISA, the 22% charge is the change that affects you, and it arrives on the same date. If the ISA holds only Money Market Funds, the new rule on them affects you instead.
What a cash ISA is worth compared with taxable savings depends on whether your interest would have been taxed at all - the Personal Savings Allowance covers £1,000 of interest for a basic-rate saver and £500 for a higher-rate one. The ISA calculator prices that, and the cash ISA vs taxable savings guide works through when the wrapper earns its keep.
What is still not settled
The Exchequer impact table in HMRC’s note is empty for every year from 2025/26 to 2030/31, with the explanation that “the final costing will be subject to scrutiny by the Office for Budget Responsibility”. So the revenue effect of the measure is not yet published.
The operative wording is public: SI 2026/1018 was made on 10 September 2026 and comes into force on 6 April 2027.