Cash inside investment ISAs will also be targeted
Another significant rule concerns cash held inside non-cash ISAs.
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Investors will still be able to hold some cash in those accounts, but interest earned on that cash will face a 22% charge from April 2027.
The rules also address Money Market Funds and other arrangements that could potentially be used to recreate the effect of holding large cash balances inside investment accounts.
HMRC describes these provisions as anti-circumvention measures designed to make sure the £12,000 Cash ISA restriction cannot simply be sidestepped.
Why this matters for ordinary savers
For someone who normally puts £5,000 or £10,000 a year into a Cash ISA, the immediate impact may be limited.
But savers who regularly use most or all of the current £20,000 allowance in cash face a very different position.
From April 2027, an under-65 saver wanting to use the entire ISA allowance could, for example, place:
£12,000 into a Cash ISA
and then put the remaining:
£8,000 into a non-cash ISA.
What they will no longer be able to do is place the entire £20,000 into Cash ISAs.
The £20,000 overall ISA allowance is due to remain in place until at least April 2031.
The deadline is now fixed
The new regime comes into force on 6 April 2027.
Until then, the current rules continue to apply, meaning savers can still use up to the full £20,000 annual ISA allowance for cash if they choose.
But once the new tax year begins, the rules for under-65s change sharply.
For many people, the key number will no longer simply be the familiar £20,000 ISA allowance.
It will be £12,000 — because that is the maximum amount under-65s will be able to subscribe to Cash ISAs each year under the new regime.
