Monzo has issued a warning to customers about an upcoming change to ISA allowances that will reduce the amount they can deposit into cash ISAs from next April. Under current rules, savers can pay up to £20,000 per tax year into tax-free ISAs, split freely between cash and stocks and shares accounts. But from April 2027, savers aged under 65 will only be able to use £12,000 of that allowance for cash deposits, with the remaining £8,000 restricted to investment-based accounts.
Jo Phillips, general manager for Wealth at Monzo, said the change is designed to encourage more people to invest, as stocks and shares typically outperform cash interest rates over the long term. She urged customers to plan ahead: "My advice to savers is to keep making full use of your annual ISA allowance where you comfortably can - it remains a vital way to earn tax-free interest on your hard-earned savings."
What the ISA rule change means for savers
Under the current system, anyone can deposit up to £20,000 each tax year into ISAs, splitting the amount between cash and stocks and shares as they wish. From next April, however, the cash ISA portion of that allowance will be capped at £12,000 for savers under 65. The remaining £8,000 will only be available for deposits into investment-based accounts, such as stocks and shares ISAs.
Phillips added: "If you're under 65, you can still make the most of the full £20,000 limit this tax year. But it's worth getting ahead of next April's changes today." She advised customers to "start researching your options for any savings above the proposed £12,000 cash limit, or even start investing small amounts now to build that habit for the future."
Monzo pushes for simpler investing
The reduction in the cash ISA allowance is intended to push more people into investing, but Phillips said the government needs to make the system "simpler and more accessible" if it wants to achieve that goal. She noted that "millions leave money sitting in cash simply because they lack the confidence or support to invest".
Monzo has focused on lowering barriers to investing, according to Phillips. "Customers can start investing with as little as £1 and with our automated features, they can top-up their investments little and often," she said. The bank reports that a third of its customers were first-time investors when it launched Monzo investments, and over half of its customers now invest every 30 days.
Call for a better policy framework
Phillips argued that the priority should be creating a policy framework that enables firms to use technology, personalised support, and real-time financial information to help more people take charge of their long-term finances. She said: "Ultimately, the priority should be creating a policy framework that enables firms to use technology, personalised support, and real time financial information to help more people take charge of their long-term finances."
The changes to the ISA allowance will take effect from April 2027, giving savers under 65 a limited window to make full use of the current £20,000 cash ISA limit before the new restrictions apply.
