When the Cash ISA changes were first announced in the November 2025 Budget, a lot of the detail on exactly how they’d work was still to come. That detail has now been published, and it’s worth an update – not least because the government has added a set of anti-circumvention rules that weren’t part of the original announcement, aimed at closing off some of the obvious ways round the new cap.
None of this is live yet. The current £20,000 ISA allowance carries on as normal for this tax year and next, and the changes only bite from 6 April 2027. But with a fair amount of lead time before then, it’s worth understanding what’s coming so you can plan around it rather than react to it at the last minute.
The core change: a lower Cash ISA limit for most savers
From 6 April 2027, if you’re under 65, the amount you can pay into a Cash ISA each tax year falls from £20,000 to £12,000. The overall £20,000 ISA allowance itself isn’t changing – it’s just that anything above £12,000 will need to go into a Stocks and Shares ISA (or another non-cash ISA type) rather than cash, if you want to use your full allowance. If you’re 65 or over, this doesn’t affect you – you’ll keep the full £20,000 Cash ISA limit. The tax-free treatment of ISAs generally hasn’t changed either: interest, dividends and gains inside any ISA remain free of Income Tax and Capital Gains Tax, whatever the government decided against touching in the Budget itself.
Closing the gaps: what’s new since the original announcement
The detail published more recently addresses something the original announcement left open – could you simply hold cash inside a Stocks and Shares ISA instead, and sidestep the £12,000 cap that way? The answer, now, is effectively no. From April 2027, a flat 22% charge will apply to interest earned on cash held within non-Cash ISAs, collected by the ISA manager directly rather than something you need to declare yourself. On top of that, a portfolio made up entirely of cash-like assets (money market funds, specifically) will lose its ISA-qualifying status altogether, and transfers from other ISA types into a Cash ISA won’t be permitted (transfers the other way, from cash into stocks and shares, still will be). If you’re 65 or over, the transfer restriction doesn’t apply to you, but the interest charge and the cash-like asset rule still do.
In practice, this means the £12,000 cap is intended to actually stick for most people, rather than being something that’s straightforward to work around using a different ISA wrapper.
What if you want to hold more than £12,000 in cash?
You still can – it just won’t all sit inside a Cash ISA. Anything held outside a tax wrapper is subject to Income Tax on the interest above your Personal Savings Allowance, which for the current tax year is £1,000 if you’re a basic-rate taxpayer, £500 if you’re a higher-rate taxpayer, or £0 if you pay the additional rate. To put that in perspective, a basic-rate taxpayer with £2,000 of interest on savings held outside an ISA would pay tax on the £1,000 above their allowance, at 20% – a £200 bill. From April 2027, those savings tax rates are also set to rise by two percentage points, to 22%, 42% and 47% respectively, so the same scenario would cost a little more from that point onward.
Is this a nudge to consider investing?
That does appear to be part of the government’s thinking – encouraging a shift from cash savings toward stocks and shares. Whether that’s right for you depends entirely on your own circumstances. Cash still has an important role: money you might need at short notice, or an emergency fund, generally belongs in cash precisely because its value doesn’t fluctuate day to day. Investing, by contrast, suits money you don’t expect to need for several years, since investment values can fall as well as rise and there’s no guarantee your return will beat inflation, let alone cash rates. If the changing rules are prompting you to think about the balance between the two, that’s a reasonable moment to review it properly rather than shifting money around reactively.
What we’d suggest doing now
As financial planners based in Poole, we’re already talking to clients across Bournemouth and the wider Dorset area about how this affects their savings and investment strategy over the next couple of years. There’s no need to do anything before 6 April 2027, but it’s a sensible time to review how your money is currently split between cash and investments, and whether that split still makes sense once the new rules land. If you’d like to talk it through, we’re always happy to have a no-obligation conversation.
Get in touch if you’d like to discuss what these changes mean for your own financial plan.
This article is for general information only and does not constitute advice. All information is correct at the time of writing (September 2026) and is subject to change in the future, including as further technical detail and consultation on the 2027 ISA reforms is published. All contents are based on our understanding of HMRC and Treasury guidance.
The Financial Conduct Authority does not regulate tax planning.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.