Cash ISA Limit Cut to £12,000 from April 2027: What It Means for You

A significant change is coming for cash savers. From 6 April 2027, the amount you can pay into a cash ISA each tax year will be cut to £12,000 for people under 65 — down from the current £20,000. The overall ISA allowance stays at £20,000, but the remaining £8,000 will have to go into a stocks and shares ISA (or another non-cash ISA) if you want to use it. Here’s what it means and how to prepare.

What’s changing, in one table

Who is affected — and who isn’t

• Affected: under-65s who currently put more than £12,000 a year into cash ISAs.
• Not affected: money already held in cash ISAs — it stays tax-free and can still be transferred.
• Reported exemption: those aged 65 and over are expected to keep the higher cash limit; confirm the final detail on GOV.UK when published.

Why the Government is doing it

Around £300 billion sits in cash ISAs. The Treasury argues that money held for the long term would grow faster in investments, supporting both savers’ returns and UK companies. Whether or not you agree, the direction of travel is clear: cash is being gently steered toward the stock market.

What to do before April 2027

• Use your 2026/27 cash allowance in full — you can still put up to £20,000 into a cash ISA this year.
• Consider a stocks & shares ISA for money you won’t need for 5+ years, so you’re ready to use the £8,000 from 2027.
• Don’t withdraw existing cash ISA money just to react — it keeps its tax-free status where it is.
• Check whether your ISA is flexible, which lets you replace withdrawals in the same year without losing allowance.

See how your ISA could grow over time under cash versus investment returns:

Why the cash ISA still matters: tax on savings

The reason a cash ISA is valuable is that all interest inside it is tax-free, forever, and it doesn’t touch your Personal Savings Allowance. With savings rates higher than in the 2010s, more people are breaching their PSA (£1,000 basic-rate, £500 higher-rate) and paying tax on ordinary savings interest for the first time — which is exactly when an ISA earns its keep.

Check whether your savings interest outside an ISA is now taxable:

Cash ISA vs stocks & shares ISA: the trade-off

The new rules push more savers toward investing, so it’s worth being clear on the trade-off. A cash ISA gives a guaranteed return and no risk to your capital — ideal for your emergency fund and money you’ll need within a few years. A stocks and shares ISA can grow more over the long run but can fall in value, so it suits money you can leave invested for five years or more. Neither is “better” — they do different jobs, and most people benefit from holding both.

The bottom line

From April 2027 the cash ISA limit drops to £12,000 for under-65s, though the £20,000 total allowance and all your existing ISA savings are untouched. If cash is your preference, front-load it: use the full £20,000 cash allowance this tax year, and start thinking about a stocks and shares ISA for the £8,000 you’ll no longer be able to hold in cash from 2027.