A major shake-up of ISA rules has now been confirmed, with millions of savers under the age of 65 facing a new restriction on how much they can put into a Cash ISA each year.
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From 6 April 2027, the annual Cash ISA limit for people under 65 will be cut to £12,000, down from the current position where the full £20,000 ISA allowance can be held in cash. The overall ISA allowance itself will remain at £20,000.
The move has attracted attention after being reported under Andy Burnham’s government, with the change set to alter the way many households use one of Britain’s most familiar tax-free savings products. The Manchester Evening News has also highlighted the new £12,000 rule in its coverage of the ISA changes.
The £20,000 allowance is staying — but there is a catch
At first glance, savers may see that the overall ISA allowance remains at £20,000 and assume little is changing.
But for anyone under 65, there is a major difference.
Under the current system, somebody can choose to place the full £20,000 annual ISA allowance into a Cash ISA.
From April 2027, they will no longer be able to do that.
Only £12,000 can go into Cash ISAs. The remaining £8,000 would need to be placed into another eligible type of ISA if the saver wanted to use the full £20,000 annual allowance.
That could mean Stocks and Shares ISAs, Innovative Finance ISAs or other qualifying ISA products, depending on the saver’s circumstances.
For people who deliberately prefer cash because they do not want investment risk, the distinction is significant.
Under-65s are the group directly affected
The new restriction applies specifically to people below the age of 65.
Those aged 65 and over will continue to have a £20,000 annual Cash ISA limit.
HMRC has confirmed that entitlement to the higher allowance will apply from the start of the tax year in which a person turns 65.
That creates a clear dividing line between younger and older savers under the new system.
A 64-year-old saver could therefore face a £12,000 Cash ISA ceiling, while someone covered by the 65-and-over rules could continue placing up to £20,000 into cash.
The government wants more money moved into investments
The change is not accidental.
HMRC says the policy is designed to encourage people to direct a greater proportion of their savings towards retail investments rather than cash.
The government argues that historical trends suggest investments can provide stronger long-term returns than cash savings, although investment values can fall as well as rise and returns are not guaranteed.
For many cautious savers, however, Cash ISAs have historically offered something quite different: straightforward tax-free interest without exposure to stock-market movements.
From April 2027, people under 65 who routinely save more than £12,000 a year into Cash ISAs will have fewer options if they want to remain entirely in cash within the ISA system.
There will also be tougher transfer rules
The government is also closing off routes that could otherwise be used to get around the new limit.
From April 2027, under-65s will not be allowed to transfer money from certain non-cash ISAs, including Stocks and Shares ISAs and Innovative Finance ISAs, back into a Cash ISA.
Transfers in the other direction — from a Cash ISA into a non-cash ISA — will still be allowed.
The intention is clear: savers will not be able to place money into an investment ISA first and then simply move it back into cash to bypass the £12,000 restriction.
