The Chancellor announced the biggest change to ISA rules in a decade at the Autumn Budget. From April 2027, the amount you can put into a cash ISA each year falls from £20,000 to £12,000 — if you're under 65. Here's what it means and how to use the two-year window wisely.
What's actually changing
The total annual ISA allowance stays at £20,000. What changes is how you can split it.
From 6 April 2027, if you're under 65:
- Maximum £12,000 into cash ISAs per year
- The remaining £8,000 can go into investment-type ISAs — Stocks & Shares, Innovative Finance, or Lifetime ISA
- There is no obligation to use the £8,000 investment portion — you can simply contribute less than the full £20,000
This is the first cut to the cash ISA allowance since 2017, when it was raised from £15,240 to £20,000. The Chancellor's stated aim is to encourage more people to invest rather than hold large sums in cash.
If you're 65 or over: nothing changes for you. You keep the full £20,000 cash ISA allowance. The government explicitly exempted over-65s following sustained lobbying, recognising that older savers often need accessible, low-risk savings in retirement.
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Your existing ISA savings are completely unaffected. Money already inside your ISA stays tax-free with no limit. The new rules only apply to new contributions made from 6 April 2027 onwards.
Why the government did this
The policy follows years of debate. At the Mansion House speech in July 2025, Reeves had been expected to cut the limit to £4,000 — but backed away amid fierce resistance from building societies, who rely on cash ISA deposits as a critical source of funding for mortgage lending. The £12,000 figure is a compromise between those who wanted a much lower cap and those who opposed any cut at all.
Whether the policy achieves its aim is genuinely uncertain. Critics point out that risk-averse savers may simply move money into taxable savings accounts rather than the stock market — which would undermine the stated goal while also reducing the tax protection available to ordinary savers.
Who this actually affects
Fewer people than the headlines suggest. Most people who open a cash ISA contribute well below £12,000 per year. The average cash ISA subscription is significantly below the current £20,000 limit.
🔴 Affected
Savers who regularly put more than £12,000 per year into a cash ISA. People building large emergency funds or house deposits in a cash ISA. Those who prefer cash certainty over stock market exposure and want to shelter as much as possible from tax. Research suggests over 40% of active cash ISA users deposit more than £12,000 annually.
🟢 Not affected
Anyone who contributes less than £12,000 per year — the change is invisible to them. Anyone aged 65 or over. Anyone using a Stocks & Shares ISA — no cap change there. Existing ISA balances from previous years.
The compounding problem: savings tax rises at the same time
This is the part that doesn't get enough attention. The cash ISA cut doesn't arrive in isolation. The Autumn Budget 2025 also announced that from April 2027, the tax rate on savings interest earned outside an ISA is proposed to rise by 2 percentage points across all bands — from 20% to 22% at basic rate, from 40% to 42% at higher rate, and from 45% to 47% at additional rate. This is a separate announcement from the dividend tax increases already taking effect in April 2026. Both the savings tax rise and the cash ISA cut are subject to Finance Bill legislation — the direction is clear but verify final rates when the Bill passes.
The Personal Savings Allowance (£1,000 for basic-rate taxpayers, £500 for higher-rate) remains unchanged. The combined effect: less shelter from the ISA, and higher tax on anything that overflows into a taxable account. Both changes point in the same direction — making use of your ISA allowance now, while you still have full flexibility, is more valuable than it has ever been.
Taxpayer
£50k at 4.5% = £2,250 interest
Tax from Apr 2027 if outside ISA
Basic rate
£1,000 PSA free, £1,250 taxable
£1,250 × 22% = £275
Higher rate
£500 PSA free, £1,750 taxable
£1,750 × 42% = £735
Additional rate
No PSA, £2,250 taxable
£2,250 × 47% = £1,057
Inside a cash ISA
Same £2,250 interest
£0 tax
Based on proposed April 2027 rates as announced in the Autumn Budget 2025. Subject to final legislation.
The two-year window: what to do before April 2027
You have two full tax years under the current rules — 2025/26 (almost gone) and 2026/27. Here is how to use them.
1. Use the full £20,000 cash ISA allowance in 2026/27
The 2026/27 tax year — starting 6 April 2026 — is the last year you can put £20,000 into a cash ISA. If you have surplus savings sitting in taxable accounts, moving up to £20,000 into a cash ISA next year locks in tax-free status on that money permanently. After April 2027, you can only add £12,000 per year in cash.
2. Move existing taxable savings into a cash ISA now
Cash savings earning interest in a regular savings account are exposed to higher tax rates from April 2027. Transferring into a cash ISA (using your 2025/26 or 2026/27 allowance) permanently shelters that interest from tax. The ISA wrapper protects you forever — not just for one year.
3. ISA transfers don't count against your annual allowance
If you have old ISAs from previous years earning a poor rate, you can transfer them to a better provider at any time without using your annual allowance. A transfer from a 1.5% legacy ISA to a 4.4% cash ISA is a meaningful gain — and the transferred balance remains inside the wrapper regardless of new rules.
4. Consider what the £8,000 investment portion means from 2027
From April 2027, to use the full £20,000 allowance, £8,000 must go into a non-cash ISA. If stock market risk concerns you, there are lower-risk options within a Stocks & Shares ISA: government gilt funds, money market funds, and multi-asset defensive funds can all be held inside the wrapper. You don't have to hold individual shares to access a Stocks & Shares ISA.
5. Couples: coordinate your allowances
Each adult has their own ISA allowance. From 2027, a couple under 65 can between them shelter up to £24,000 per year in cash ISAs — £12,000 each. Assets can be transferred between spouses and civil partners without triggering Capital Gains Tax, making joint ISA planning more straightforward than it might seem.
Key dates at a glance
Now → 5 Apr 2026
Final days of 2025/26. Up to £20,000 into a cash ISA still available. Use it or lose it on 5 April.
6 Apr 2026
2026/27 begins. Full £20,000 cash ISA allowance for the last time. Dividend tax rises take effect.
5 Apr 2027
Last day of the current £20,000 cash ISA era. Final chance to top up under the old rules.
6 Apr 2027
New rules begin (as proposed). Cash ISA capped at £12,000 for under-65s. Savings interest tax rates rise by 2 percentage points.
The Lifetime ISA: what's happening
The Budget documents confirmed the Lifetime ISA will be replaced by a new first-time buyer product, with a consultation published in early 2026. Until the replacement is confirmed and available, the LISA continues to operate as before: £4,000/year maximum, 25% government bonus, for a first home purchase up to £450,000 or retirement from age 60. The LISA counts towards your overall £20,000 annual ISA allowance. LISA and Junior ISA limits are confirmed unchanged until at least April 2031.
If you currently hold a LISA and are planning to use it for a home purchase, it is worth monitoring the consultation for any changes to the £450,000 property price threshold — this has been flagged as an area for review given how much house prices have risen since the LISA launched in 2017.
Frequently asked questions
Does the £12,000 cut affect my existing ISA savings?
No. Money already inside your ISA stays completely tax-free with no limit. The new rules only apply to new contributions made from 6 April 2027 onwards. Existing balances are permanently protected.
Can I still put my full £20,000 into a Stocks & Shares ISA from 2027?
Yes — there is no cap on the Stocks & Shares ISA portion. You can put your entire £20,000 allowance into a Stocks & Shares ISA if you choose. The £12,000 cap applies only to the cash ISA type.
What if I turn 65 part-way through the 2027/28 tax year?
The Government stated the rules for those who turn 65 part-way through a tax year will be determined following an industry consultation in 2026. Until confirmed, check gov.uk for final legislative details ahead of the 2027/28 tax year.
Will the savings tax rates definitely rise from April 2027?
This was announced in the Autumn Budget 2025 as a confirmed change. Multiple major sources report the proposed increase of 2 percentage points across all bands for savings, dividend, and property income. As with all Budget announcements, it requires Finance Bill legislation before it becomes law. The direction is clearly signalled — verify the final rates when the Bill passes.
Should I open a cash ISA this tax year even if I can't fill it?
Yes — any amount you put in now is permanently sheltered from tax. You don't need to reach £20,000. Even a few thousand pounds in a cash ISA growing at 4%+ tax-free is more efficient than the same money in a taxable savings account, especially with higher tax rates coming from 2027. Use the Savings Finder to compare current cash ISA rates.
Is the Lifetime ISA being scrapped immediately?
No. The LISA continues to operate under current rules until the replacement product is confirmed and available. The Budget indicated the new first-time buyer product will be introduced following a 2026 consultation. Until then, existing LISA savers and those eligible to open one (aged 18–39) can continue as normal.
💡 BritSavvy note
This article explains the policy as announced in the Autumn Budget 2025. Tax rules are subject to change until legislated. The ISA Allowance Tracker shows how much of your current year's £20,000 allowance you've used and what's still available. The Savings Finder compares current best-buy cash ISA rates — useful if you're deciding where to open or transfer one before April 2027. Always check gov.uk for the latest confirmed rules.