The 2025 Autumn Budget, delivered by Chancellor Rachel Reeves, includes significant changes to the rules governing cash ISAs.
📉 Reduced cash ISA allowance for under-65s
- From April 2027, the annual tax-free deposit limit for cash ISAs will fall from £20,000 to £12,000 — but only for savers aged under 65.
- The £20,000 allowance will still apply to those aged 65 or over.
- Importantly, the overall ISA allowance remains unchanged at £20,000 per year. This means savers can still subscribe up to £20,000 across any combination of ISA types (cash, stocks & shares, etc.).
What happens to other ISA types
- The change only affects cash ISAs — there is no reduction in the contribution limit for stocks & shares ISAs. That limit remains at £20,000 per tax year.
- The overall ISA cap remains the same, allowing flexibility in how individuals allocate their tax-free savings between cash and investments.
Why the change — and what it aims to achieve
The government’s stated objective is to encourage savers to shift from cash — which tends to deliver low yields — into investments such as stocks and shares. This is partly described as a bid to channel more money into the UK equity market.
Supporters argue that this could help savers achieve better returns over the long run, and potentially support growth in UK businesses. However, some commentators caution that cutting the cash ISA allowance may not necessarily lead to a substantial shift toward investing.
What this means for savers — and what to do now
Individuals under 65 who primarily use cash ISAs might want to consider whether cash savings remain the best vehicle, or whether a stocks & shares ISA could better meet their long-term goals. This is especially relevant with interest rates predicted to be cut in 2026.
For those who want to make the most of the current £20,000 cash ISA allowance, it may be sensible to act before April 2027 — especially if you expect to maintain a cash-based reserve.
As always with ISAs and investments, decisions should reflect personal circumstances, including risk tolerance, time horizon, and liquidity needs.
If you are unsure how these ISA changes might affect your savings or long-term plans, we’re here to help.
Contact us today for personalised, independent guidance on making the most of your ISA allowances.