From 6 April 2027, the annual Cash ISA allowance for savers under 65 will drop from £20,000 to £12,000. The cut was confirmed by Chancellor Rachel Reeves in the Autumn Budget 2025 (26 November 2025) and represents the first reduction to the Cash ISA allowance since 2017.
The overall ISA allowance remains at £20,000. But £8,000 of that allowance will be effectively reserved for Stocks and Shares, Innovative Finance or Lifetime ISAs, in a move designed to push more UK savers into the stock market.
The headline changes
| Item | From 6 April 2027 |
|---|---|
| Overall ISA allowance | £20,000 (unchanged) |
| Cash ISA allowance (under 65s) | £12,000 (down from £20,000) |
| Cash ISA allowance (65 and over) | £20,000 (unchanged) |
| Stocks & Shares ISA allowance | Up to £20,000 |
| Junior ISA allowance | £9,000 (unchanged) |
| Lifetime ISA allowance | £4,000 (unchanged, within the £20k) |
Rules on how to treat savers who turn 65 part-way through a tax year will be determined after an industry consultation in 2026.
Why the government is doing this
Chancellor Rachel Reeves cited in her Budget speech: "The UK has some of the lowest levels of retail investment in the G7, and that is not only bad for business, who need that investment to grow; it is bad for savers, too."
Evelyn Partners data shows that Cash ISA subscriptions grew 67% to £27.9 billion in 2023-24, versus just 11% growth in Stocks and Shares ISA subscriptions. There were just under 10 million new Cash ISA subscriptions and 4.09 million new Stocks and Shares ISA subscriptions in that year. The government wants to shift this balance to support UK capital markets.
Who is actually affected
Less than one in three Cash ISA subscribers contribute more than £12,500 a year, according to government data, with the average subscription sitting at around £7,000. That means the majority of UK Cash ISA savers will see no practical change. Affected groups include:
- High earners using the full £20,000 allowance in cash
- Savers accumulating a house deposit entirely in Cash ISAs
- Risk-averse savers who prefer cash over market exposure
- Anyone planning to make large lump-sum ISA contributions for the 2027/28 tax year onwards
The wider savings tax squeeze
The Cash ISA cut sits alongside other tax rises confirmed in Autumn Budget 2025:
- Savings income tax up 2 percentage points from April 2027 — basic rate rises 20%→22%, higher rate 40%→42%, additional rate 45%→47%.
- Dividend tax up 2 percentage points from April 2026 — basic rate rises from 8.75% to 10.75%, upper rate from 33.75% to 35.75% (no change to additional rate).
- Property income tax up 2 percentage points from April 2027.
- Allowance freeze extended to April 2031 — Personal Allowance, higher-rate threshold and other key thresholds remain frozen.
What savers should consider
- Use the full £20,000 Cash ISA allowance in 2026/27 — this is the last tax year (for under-65s) where the full £20k can go into cash if you want it to.
- Review your Personal Savings Allowance headroom — £1,000 for basic-rate taxpayers, £500 for higher-rate, £0 for additional-rate. At 4% interest you can hold around £25,000 outside an ISA as a basic-rate taxpayer before tax applies.
- Consider Premium Bonds — tax-free in a different way. Useful for the risk-averse saver pushed out of excess cash ISA.
- Look at money market funds inside a Stocks & Shares ISA — cash-like returns within the ISA wrapper, although still subject to market risk.
- Low-risk Stocks & Shares ISA options — money market, short-dated gilt and multi-asset funds sit between pure cash and equity risk.
- Consider a Lifetime ISA if eligible — £4,000/year contribution within the £20,000 wrapper, plus 25% government bonus (£1,000 per year free money, age 18-39 only, for first home up to £450,000 or retirement from 60).
Lifetime ISA — separate reform coming
The Budget document announced a consultation in early 2026 on a new, simpler ISA product to support first-time buyers, which would eventually replace the Lifetime ISA. MoneySavingExpert's Martin Lewis has indicated the consultation will include increasing the £450,000 property price threshold for existing LISA savers, which has been frozen since launch in 2017.
Disclaimer
This article is for general information only and does not constitute financial or tax advice. ISA rules are set by HMRC and can change. The value of investments in a Stocks and Shares ISA can fall as well as rise, and you may get back less than you invest. Always consult an FCA-regulated adviser before restructuring your ISA holdings.
FAQ
Does the change affect money already in my Cash ISA?
No. The cut only applies to new contributions made from 6 April 2027 onwards. Existing Cash ISA balances retain their tax-free status.
Can I still transfer between Cash and Stocks & Shares ISAs?
Transfers between ISA types are preserved as of the announcement. However, policy could evolve — watch for HMRC guidance during 2026.
What if I am in my 60s but not yet 65?
The rules on treatment around age 65 will be finalised following an industry consultation in 2026. The Budget confirmed the £20,000 Cash allowance is preserved for those 65 and over, but the exact mechanics — particularly for those turning 65 mid-year — are pending.
