The Cash ISA Cap Is Coming: A UK Saver's Action Plan

If you are a UK saver, the clock is now officially ticking. From 6 April 2027, the amount you can put into a cash ISA each year falls from £20,000 to £12,000 for savers under 65. The rule is confirmed in legislation made on 10 September 2026, and the Autumn Budget on 28 October 2026 may add more changes on top. Here is what is changing, who it actually affects, and what to do about it now.

What is changing, in plain English

A cash ISA is a savings account where the interest is free of income tax. Right now, you can shelter up to £20,000 a year in cash ISAs. From 6 April 2027, that falls to £12,000 a year for anyone under 65. The overall ISA allowance stays at £20,000, so the remaining £8,000 can still go into a stocks and shares ISA. Three details matter more than the headline:

• Only new contributions are capped. Money already inside a cash ISA keeps its tax-free shelter — nothing already saved is touched.
• The over-65s are exempt. Savers aged 65 and over keep the full £20,000 cash ISA allowance, from the start of the tax year in which they turn 65.
• The workaround is closed. Under-65s will no longer be able to transfer money from a stocks and shares ISA (or an Innovative Finance ISA) into a cash ISA. And from April 2027, interest on cash held inside a stocks and shares ISA faces a 22% charge — the dodge is deliberately closed.

How bad is it? The numbers

Before panicking, look at the data. HMRC's impact assessment found that 78% of cash ISA subscribers under 65 paid in less than £12,000 during the 2022/23 tax year. For most people, the cap changes nothing in practice. Around 16.8 million adult ISA accounts received subscriptions in 2024-25, up from 15 million the year before — yet only a minority of savers max out the cash allowance.

For most people, the £12,000 cap may make little practical difference. For those who regularly save more, it could get harder to shelter all new cash savings from tax.

The pain is concentrated at the top. One calculator estimated that if you keep saving £20,000 a year in cash, the displaced £8,000 a year — at 4.5% interest — builds to £290.40 of extra tax over five years for a basic-rate taxpayer, £1,276.80 at higher rate and £2,538.00 at additional rate. The double squeeze is real: savings-income tax rates also rise from 2027/28, to 22% for basic-rate taxpayers, 42% for higher-rate and 47% for additional-rate payers.

	Now (2026/27)	From 6 April 2027
Cash ISA limit (under 65)	£20,000	£12,000
Cash ISA limit (65+)	£20,000	£20,000
Overall ISA allowance	£20,000	£20,000
Cash interest inside S&S ISA	Tax-free	22% charge
Savings-income tax (basic / higher / additional)	20% / 40% / 45%	22% / 42% / 47%

Five moves to make before the change

1. Use the full £20,000 for 2026/27 while you can

The 2026/27 tax year, running until 5 April 2027, is the last full year in which the entire £20,000 can go into cash. If you have accessible savings and unused ISA allowance, contributing now secures the money under the current, more generous rules. There is little benefit in waiting until the end of the tax year — earlier contributions earn interest sooner.

2. Know your numbers: allowance, rates, allowance used

Find out how much of this year's ISA allowance you have already used, and stack your current savings rate against the best available. The personal savings allowance — £1,000 of tax-free interest for basic-rate taxpayers, £500 for higher-rate taxpayers, nothing for additional-rate payers — was not changed, so check whether your non-ISA interest already exceeds it.

3. Do your transfers before April 2027

If you have cash sitting in a stocks and shares ISA that you intend to move into a cash ISA, do it while transfers in that direction are still allowed for under-65s. Cash-to-stocks transfers will still work after the change.

4. Use both partners' allowances

For couples, using both partners' allowances doubles the shelter: £40,000 a year overall, or £24,000 a year in cash from April 2027 for two under-65s. Moving taxable savings into the name of a lower-earning spouse can also help if they pay tax at a lower rate or have more of their personal savings allowance available.

5. Watch the Budget on 28 October

The Autumn Budget is less than a fortnight away and could confirm or extend these changes. First announced at the Autumn Budget 2025, the reforms are expected to proceed as planned. Anything announced on Budget Day will need checking against this plan — particularly any fresh changes to savings tax or ISAs.

Frequently asked questions

Will my existing cash ISA balance be affected?

No. The £12,000 cap applies only to new subscriptions from 6 April 2027. Everything already inside your cash ISA keeps its tax-free status, and the interest on it stays tax-free.

I'm 64 now and turn 65 in 2027 — which rules apply?

The over-65 exemption applies from the start of the tax year in which you turn 65, so if your 65th birthday falls in 2027/28, you keep the full £20,000 cash allowance for that tax year.

Can I just hold cash in a stocks and shares ISA instead?

Not to dodge tax. From April 2027, interest on cash held in a stocks and shares ISA faces a 22% charge for all savers, whatever their age. The loophole is deliberately closed.

Does the Lifetime ISA change?

Existing Lifetime ISA holders continue under the current rules, including the 25% government bonus and its withdrawal restrictions.

Is this only a UK issue?

Yes — ISAs are a UK tax wrapper with no exact equivalent in the US, where savers use IRAs and 401(k)s instead. If you are a US reader, the lesson still travels: tax wrappers change, so max out generous allowances while they last.

The cash ISA cap is not the end of tax-free saving — but it is the end of £20,000-a-year cash sheltering for under-65s. Check how much of this year's allowance you have used, and use the rest before 5 April 2027.