New rules for Cash ISA bank accounts will come into force from 2027, affecting savers born after 1962. The changes, overseen by Prime Minister Andy Burnham and Chancellor John Healey, will reduce the Cash ISA allowance for under-65s from the current £20,000 to £12,000.
Cash ISAs are a popular type of bank account that shields savings from tax. The changes were initially announced by former Chancellor Rachel Reeves, but it will now be Mr Burnham and Mr Healey's responsibility to implement them during their tenure in No11 and No10.
What Are the New Rules?
From the start of the 2027 tax year, the annual Cash ISA allowance for individuals under the age of 65 will be reduced to £12,000. In contrast, the allowance for Stocks and Shares ISAs and Innovative Finance ISAs (non-Cash ISAs) will remain at £20,000.
For those aged 65 and over, the Cash ISA allowance will stay at £20,000. Entitlement to the higher limit will apply from the start of the tax year in which an individual turns 65.
Government Statement on the Changes
The government has clarified: "Individuals aged 65 and over will benefit from a higher Cash ISA limit of £20,000, entitlement to which will apply from the start of the tax year in which an individual turns 65."
"The transfer restriction will be disapplied from this point. The charge on interest earned on cash held in non-Cash ISAs and the prohibition on 100% cash-like investments will remain in place."
Concerns Raised by Wealth Management Firm
Amicus, a wealth management firm, has expressed concerns about the changes. "Introducing age-based allowances and adding tax elements into what has traditionally been a tax-free system could make ISAs harder to follow," the firm said.
"There are also concerns this added complexity may discourage some people from making full use of their allowance."
Potential Impact on Savers
Industry commentators have suggested the proposals risk making a straightforward product more complicated, potentially undermining the goal of encouraging greater investment. The changes could affect how savers use their allowance, particularly those who currently rely on Cash ISAs or hold cash within investment ISAs.
Personal finance experts advise that while there is no immediate need to act, it is a good time to review whether your current savings approach still fits your long-term plans.
