Millions of savers face a major shake-up of bank account rules as the tax-free cash ISA allowance is set to be cut from £20,000 to £12,000 for those under 65 from April 2027. The change, announced by former Chancellor Rachel Reeves, means working-age couples with over £10,000 in savings will no longer be able to put as much into cash ISAs.
What the ISA Changes Mean for Savers
Under the new rules, savers aged under 65 will only be able to contribute up to £12,000 per year into cash ISAs. However, the overall ISA allowance will remain at £20,000, meaning savers can still put the remaining £8,000 into stocks and shares accounts. But any interest earned on cash held inside stocks and shares ISAs will be subject to a 22% charge from 6 April 2027.
Pensioners are protected from the changes and will continue to enjoy the existing £20,000 cash ISA limit. The move aims to boost the economy by encouraging more investment in stocks and shares, according to the Government.
Expert Reaction and Details
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 Households
The major benefit of cash ISAs is that interest earned is not taxed. With the reduced allowance, households with substantial savings may need to review their savings plans and consider alternative options. The changes are part of broader efforts to stimulate investment in the UK economy.
