The Government has announced a number of changes to Individual Savings Accounts (ISAs) following the Autumn Budget 2025, as part of its wider strategy to develop a retail investment culture. Following the Budget, the Government consulted with ISA providers, investment industry bodies and consumer representatives to develop detailed rules. This is a summary of key changes from 6 April 2027.
Although these changes do not take effect until 6 April 2027, they may influence how some people choose to save in the future.
What is changing?
Cash ISA limit reduced for most savers
From 6 April 2027, the annual amount that can be paid into a Cash ISA will change:
- Under age 65: Cash ISA limit will reduce from £20,000 to £12,000 per tax year.
- Age 65 and over: The Cash ISA limit will remain at £20,000 per tax year.
Therefore, if you're under 65, the maximum you can save into a Cash ISA each year falls from £20,000 to £12,000 from April 2027.
The overall annual ISA allowance will remain £20,000 until at least April 2031. The allowance covers Cash ISA (cash ISA), Stocks & Shares ISA, Innovative Finance ISA (non-cash ISAs) and Lifetime ISA.
New restrictions on ISA transfers
From April 2027, if you are under 65, you will no longer be able to transfer money from a Stocks & Shares ISA or Innovative Finance ISA into a Cash ISA. However, transfers from a Cash ISA into a Stocks & Shares ISA will still be allowed.
New rules for cash held within investment (non-cash) ISAs
The Government also wants to discourage people from using investment ISAs simply as cash savings accounts. As a result:
- Interest earned on cash held within a Stocks & Shares ISA or Innovative Finance ISA will be subject to a flat rate 22% charge.
- Investors will still be able to hold cash in a non-Cash ISA, but the flat rate charge of 22% will apply to any interest or alternative finance return paid on cash held within a non-Cash ISA to discourage long-term cash holdings.
- ISA managers will pay the charge to HMRC — individuals are not required to declare to HMRC any interest paid on an ISA.
- The Personal Allowance and Personal Savings Allowance do not apply to any growth or interest paid in an ISA.
- Portfolios made up entirely of "cash-like" investments (such as Money Market Funds) will no longer qualify for ISA tax benefits. Investors will instead be expected to reinvest in qualifying investments or remove those holdings from the ISA.
Savings tax rates
From 6 April 2027, the Income Tax rates applying to taxable savings income outside ISAs will increase to:
- Basic rate: 22%
- Higher rate: 42%
- Additional rate: 47%
The Personal Savings Allowance and the Starting Rate for Savings will remain unchanged.
What it means for you
- If you simply save into a Cash ISA and your annual contributions are below £12,000, nothing changes from April 2027.
- If you regularly save more than £12,000 each year into Cash ISAs and are under 65, you may need to consider using other ISA options or alternative savings arrangements for the excess.
- If you hold a Stocks & Shares ISA but keep a significant amount in cash rather than invested, it may be worth reviewing your account before the new rules come into force, as cash held within these ISAs could become subject to a tax charge of 22%.
As these changes do not take effect until April 2027, there is no need to take immediate action. However, they are worth bearing in mind when planning your future savings.
If you're unsure how these changes may affect your savings, please get in touch. While we don't provide investment advice, we can explain the tax implications and, where appropriate, introduce you to an independent financial adviser.