What are the 2027 ISA allowance changes?
From 6 April 2027, the cash ISA allowance for under-65s is set to fall from £20,000 to £12,000. The overall ISA allowance stays at £20,000, so the remaining £8,000 would need to go into a stocks and shares (or innovative finance) ISA. Those aged 65 and over keep the full £20,000 cash allowance.
Why is the government changing ISAs?
The reform was announced at the Autumn Budget 2025 as part of a push to build a stronger retail investment culture in the UK. The thinking is that money left in cash over the long term tends to lose value to inflation, and that encouraging more savers to invest could mean better long-term returns. The exemption for over-65s reflects that older savers often rely more on accessible cash.
Can I keep the extra as cash in a stocks and shares ISA?
Not without a cost. To stop savers sidestepping the lower limit by holding cash inside a stocks and shares ISA, any interest paid on cash within one is set to face a flat 22% charge. You also won't be able to transfer money from a stocks and shares ISA back into a cash ISA, though moving from cash into investments will still be allowed.
These details come from draft rules still under consultation, so they could change before April 2027.
Who does this actually affect?
It depends on how you use your allowance. If most of your ISA money is invested, the main change is that holding a large cash balance inside a stocks and shares ISA becomes less attractive once the 22% charge applies.
If you use some or all of your allowance as cash, and plenty of under-65s do, whether for a house deposit, a cautious approach, or simply preferring no risk, you'll only be able to shelter up to £12,000 in cash each year from April 2027. Anything beyond that would need to go into investments to stay tax-free, or sit outside an ISA where the interest may be taxed.
What can I do before April 2027?
The 2026/27 tax year is the last full year under the current rules, so until 5 April 2027 under-65s can still use the whole £20,000 in cash if that suits them.
It's also worth checking any cash sitting in a stocks and shares ISA before then. From April 2027, the 22% charge will apply to interest on that cash, and you won't be able to transfer it into a cash ISA. If the money is earmarked for the long term, investing it is the natural next step. If you'd rather keep it as cash, one option is to move it into a cash ISA before 6 April 2027, while those transfers are still allowed. Our pension or ISA piece covers how the wrappers compare.
Is moving into investments the right move?
The government's broad aim is reasonable: cash held for the long term tends to lose value to inflation. But that only holds for the right money, and the decision is still yours to make. Before shifting anything from cash into investments, weigh up your time horizon and your tolerance for risk. Money you may need within the next few years generally belongs in cash, where its value won't swing. Money you can leave untouched for five years or more has time to ride out the ups and downs. The lower limit changes the tax treatment, not what's right for your circumstances.
