From April 2027, anyone in the UK born after 1962 will see their cash ISA allowance slashed from £20,000 to £12,000 per tax year. The change, announced by Labour Chancellor Rachel Reeves in last year's Autumn Budget, means under-65s can only hold up to £12,000 of their annual ISA allowance in cash savings. The remaining £8,000 can still be invested in stocks and shares ISAs.
What the Change Means for Savers
Currently, everyone aged 18 or over receives a £20,000 ISA allowance each tax year. Cash ISAs offer tax-free interest, while stocks and shares ISAs provide tax-free growth and income. Under the new rules, under-65s will be restricted to £12,000 in cash ISAs, but they can allocate the full £20,000 to stocks and shares ISAs if they choose.
The restriction aims to encourage more investment in the stock market, but financial expert Martin Lewis has criticised the approach. Speaking to the BBC, Lewis said: "This is a very blunt tool and it will be very frustrating for many stocks and shares ISA holders. The big issue is if you sell a fund or shares within your ISA, you are then charged tax on any interest if you keep it in cash. Yet many people, sensibly, like to drip-feed money into investments over time to ride out the market ups and downs, and this is a disincentive to do that. The nearest get-around will be to use Money Market Funds in the meantime."
Transfer Restrictions and Exemptions
Additionally, from April 2027, under-65s will be prohibited from transferring money from non-cash ISAs (such as stocks and shares ISAs) into cash ISAs. However, the reverse transfer—moving money from cash ISAs into non-cash ISAs—will still be permitted. These transfer restrictions will be lifted from the start of the tax year in which the account holder turns 65.
The changes are expected to impact millions of savers, particularly those who prefer the security of cash savings over market-linked investments. Critics argue the policy could discourage saving and penalise cautious investors.
