Your cash ISA limit falls to £12,000 on 6 April 2027 — unless you are 65

HM Revenue and Customs published its impact note on 17 September 2026. From 6 April 2027, anyone under 65 can pay £12,000 a year into a cash ISA instead of £20,000, and anyone aged 65 or over keeps the full £20,000. The higher limit starts at the beginning of the tax year in which you turn 65, not on your birthday. The overall ISA allowance stays at £20,000, so the missing £8,000 can still be sheltered from tax — just not in cash.

That leaves one tax year at the old limit. It ends on 5 April 2027.

HMRC’s own impact note says that in 2022 to 2023, 78% of cash ISA subscribers aged under 65 paid in less than £12,000 and 22% paid in more. So the new limit bites on about one saver in five. The same note says the money moving as a result “is not expected to have a significant macroeconomic impact”, which is the department saying the point of the change is where savings sit, not what the economy does.

The three branches

For the £8,000 a year that no longer fits in cash, there are three places it can go.

One, into the cash ISA now, before 5 April 2027. The limit is on what you pay in each year, not on the balance, so money already inside stays inside and keeps earning tax-free.

Two, into a stocks and shares ISA from April 2027. If you leave it sitting there as cash, a flat-rate 22% charge applies to the interest, and HMRC says the charge is there to discourage long-term cash holdings. The ISA manager pays it to HMRC; you do not declare it. Cash-like holdings are still allowed, but only as part of an account — from April 2027 “cash-like” means money market funds, and they cannot be everything you hold.

Three, into an ordinary savings account, using the personal savings allowance: £1,000 of interest tax-free at basic rate, £500 at higher rate, nothing at additional rate. If your other taxable income is less than £17,570 the starting rate for savings can shelter up to £5,000 of interest as well, though every £1 of other income above your personal allowance cuts that £5,000 by £1. Both of those survive the reform unchanged.

What does not survive is the rate on anything left over. From the same day, 6 April 2027, tax on savings interest rises by two percentage points: 22% at basic rate, 42% at higher rate, 47% at additional rate.

Here is what each branch costs on £8,000 from April 2027, using 4% as an example rate, which gives £320 of interest a year.

Where the £8,000 sits	Tax on £320 of interest	Interest you keep
Cash ISA	£0	£320
Stocks and shares ISA, held as cash	£70	£250
Savings account, basic-rate payer whose allowance is used up	£70	£250
Savings account, higher-rate payer whose allowance is used up	£134	£186
Savings account, allowance not yet used	£0	£320

The charge on cash inside a stocks and shares ISA is set at the same 22% as the new savings basic rate. So for a basic-rate payer with no allowance left, parking cash there is worth nothing against an ordinary savings account. For a higher-rate payer it saves twenty points of tax. On that slice the change costs about £70 a year at basic rate and about £134 at higher rate, and nothing at all if your savings interest still fits inside the personal savings allowance.

The rule that is hard to undo

Under-65s will not be able to transfer money from a stocks and shares ISA or an innovative finance ISA into a cash ISA. Transfers the other way, from cash into stocks and shares, still work, and the restriction lifts from the start of the tax year you turn 65. Moving cash into an investment ISA is therefore easier to do than to reverse.

What the answer turns on

Whether you actually pay more than £12,000 a year into cash. On HMRC’s figures, four savers in five do not, and for them the limit changes nothing — though the higher tax rate on savings held outside an ISA still does.

Your age, and specifically the tax year you turn 65 rather than the birthday itself. Two people in the same household either side of that line do not have the same answer.

Your tax rate, and how much of your personal savings allowance is already taken up by interest earned outside an ISA.

When you need the money. Shares are not a substitute for cash you plan to spend next year.

And what is not yet fixed in law: the draft regulations went to a technical consultation with industry that ran from 25 June to 2 August 2026, and the government said the regulations would be laid in the autumn. HMRC says the final costing “will be subject to scrutiny by the Office for Budget Responsibility”. A Budget before April 2027 can move any of it.

We do not publish a savings calculator, and this is not advice. What decides which personal savings allowance applies to you is your taxable income. If you are on NHS Agenda for Change, /nhs/pay-calculator will show you where your pay sits and what tax band it falls in. Our sourcing rules are at /sources.

Where these figures come from

• Cash Individual Savings Account (ISA) limit reduction — HM Revenue and Customs
• ISA reform 2027: anti-circumvention rules factsheet — GOV.UK
• Tax on savings interest: how much is tax free — GOV.UK
• Cash held in stocks and shares ISAs to be hit with 22% charge on interest from April 2027 — MoneySavingExpert

Every figure traces to a dated document — the line this section is named after. If one here is wrong, tell us and it gets fixed publicly. Work out your own figures.