Households with over £10,000 in savings will be affected by new bank account rules coming into force from April 2027, as the cash ISA allowance for under-65s is cut from £20,000 to £12,000. The change, initially announced by former Chancellor Rachel Reeves, is set to be implemented by Andy Burnham and new Chancellor John Healey.
Who is affected and what changes
People aged under 65 will only be able to put up to £12,000 into cash ISAs each tax year. This will impact households with ISAs that currently hold more than £10,000, who may need to reconsider how they manage their money ahead of the new rules. Pensioners are protected from the changes and will retain the full £20,000 cash ISA limit.
The cash ISA shake-up is designed to boost the economy by encouraging more investment in stocks and shares. Working-age savers will still be able to place the remaining £8,000 into stocks and shares accounts, but any interest earned on cash held inside these accounts will be subject to a 22% charge from 6 April 2027.
Official statements and expert analysis
Rob Morgan, chief investment analyst at Charles Stanley Direct, said: "From April 2027, the annual cash ISA allowance will be cut from £20,000 to £12,000 for those under 65, while the overall ISA allowance will remain at £20,000. Older savers will retain the full £20,000 cash allowance."
Money Saving Expert explained: "Savers who hold cash inside stocks and shares ISAs will be charged 22% on any interest earned on that cash from 6 April 2027, the Government has confirmed. The charge is designed to stop people using investment ISAs as a workaround to hold cash when the cash ISA limit is cut from £20,000 to £12,000 a year for under-65s from the same date."
Impact on savers and next steps
These changes will require many savers to reassess their savings strategies, particularly those with significant cash ISA balances. The reduction in the cash ISA allowance may lead to lower tax-free interest earnings for under-65s, while the new charge on cash held in stocks and shares ISAs aims to ensure compliance with the new limits. Savers are advised to review their accounts and consider their options before the April 2027 deadline.
