Chancellor Rachel Reeves has confirmed controversial changes to cash ISA rules that will create a divide based on age, coming into force in 2027. Currently, all savers can benefit from the £20,000 tax-free ISA limit, meaning no tax is paid on interest earned. However, from April 2027, the limit will be slashed to £12,000 for those aged under 65, while pensioners will retain the full £20,000 limit.
Impact on savers
This change is a major blow to millions of savers who rely on cash ISAs. The government hopes the move will encourage more people to invest in stocks and shares rather than leaving cash in bank accounts, thereby boosting the economy. Non-pensioner households have less than a year to take advantage of the existing limit before the rate is cut.
Money Saving Expert advice
Money Saving Expert commented: "The Chancellor has confirmed the cash ISA limit will be reduced to £12,000 a year from April 2027. The Government hopes the change – the first cut to the cash ISA allowance since 2017 – will encourage more people to invest in stocks and shares instead." They added: "Aged 65 or older? There will be no change. The £20,000 cash ISA contribution limit will continue to apply. Aged 64 or under? Your cash ISA limit will fall to £12,000. This will only apply to new contributions you make from April 2027. It won't have any impact on savings you've already contributed to a cash ISA up until this point."
Age divide concerns
The new rules create a clear divide between age groups, which some may view as unfair. While pensioners are protected, younger savers face a reduced allowance, potentially limiting their ability to save tax-free. The change is part of broader economic measures aimed at stimulating investment.
