The Cash ISA Limit Cut from April 2027: What It Means and What to Do

The Autumn Budget 2025 announced a structural change to the Cash ISA. From 6 April 2027, savers under 65 can put a maximum of £12,000 a year into Cash ISAs — down from the current £20,000. Savers aged 65 and over keep the full £20,000 Cash ISA limit. The overall ISA allowance stays at £20,000 for everyone.

This is the only ISA change in the Budget that materially affects current savers. The Stocks & Shares ISA limit, Lifetime ISA, Junior ISA, and Innovative Finance ISA are all unchanged. Your existing ISA balances are not touched in any way.

If you have meaningful cash savings, the 2026/27 tax year (running until 5 April 2027) is the last full year of the old regime. This post explains what's changing, why, and the practical decisions to make over the next ten months.

Use the Cash ISA vs Stocks & Shares ISA Calculator to compare both wrappers side by side, or the standard ISA Calculator for tax-free growth projections.

What's changing — and what isn't

Changing on 6 April 2027:

Cash ISA annual contribution limit for under-65s: £12,000 (down from £20,000).
Cash ISA annual contribution limit for 65+: £20,000 (unchanged).
Savings interest tax rates outside an ISA: 22% / 42% / 47% for basic / higher / additional rate payers (up from the marginal income tax rates that currently apply to interest above the Personal Savings Allowance).

Not changing:

Overall ISA allowance: £20,000, regardless of age.
Stocks & Shares ISA: no cap within the £20,000 overall allowance.
Lifetime ISA: £4,000 within the overall £20,000.
Junior ISA: £9,000 per child (separate from adult allowances).
Innovative Finance ISA: no separate cap.
Personal Savings Allowance: £1,000 / £500 / £0 (unchanged in cash terms).
ISA transfers between providers: still unrestricted, no count against allowance.
Existing ISA balances of any size: untouched.

The combined effect for an under-65 saver from April 2027:

You can still use the full £20,000 ISA allowance.
At least £8,000 of it must go somewhere other than cash.
The "other" wrappers are Stocks & Shares, Lifetime, or Innovative Finance ISAs.

Why this change was made

HM Treasury's stated rationale is to encourage greater retail equity investment. The official line: the UK has a structurally larger share of household savings in cash than other comparable countries; reducing the Cash ISA limit will nudge marginal savers towards Stocks & Shares ISAs and, in turn, into the equities of UK and global companies.

You don't have to accept the reasoning to plan for the change. Whatever the policy intent, the effect is:

If you have £15,000+ a year of cash you want held tax-free, you have until 5 April 2027 to do so under the old rules.
After that, the maximum cash inside the wrapper is £12,000/year (under 65) — but balances already in the wrapper don't move.

There is no "use it or lose it" applying to existing balances. If you build £80,000 inside Cash ISAs by April 2027, that £80,000 stays there forever, growing tax-free, with full withdrawal rights.

Who is materially affected

Under-65 with substantial cash savings: the group most affected. If you typically max out the Cash ISA at £20,000 a year, this change reduces your future tax-protected cash contribution capacity by 40%.

Under-65 paying basic/higher/additional rate tax: the savings-interest tax rise compounds the effect. Interest outside the wrapper will be taxed at 22% / 42% / 47% instead of 20% / 40% / 45% from April 2027.

Over-65: unaffected by the Cash ISA cap. Still able to put £20,000 a year into cash. The savings-interest tax change for income outside the wrapper still applies, though.

Anyone with less than £12,000 a year in spare cash savings: not affected. The cap doesn't bind on you.

Anyone already comfortable with Stocks & Shares ISAs: not affected materially. The £20,000 ISA wrapper is still fully usable.

Action 1 — frontload the Cash ISA in 2026/27

If you're under 65 and you have at least £12,000 of cash savings sitting outside an ISA, the most obvious action is to make sure your 2026/27 Cash ISA contributions max out before 5 April 2027.

Each tax year stands alone for contribution purposes. You can't "carry forward" unused Cash ISA capacity from 2025/26 into 2026/27 (or 2026/27 into 2027/28). The window for putting £20,000 of cash into the wrapper closes at midnight on 5 April 2027.

A simple frontloading plan:

Identify your spare cash savings sitting outside the ISA wrapper.
Open a Cash ISA with a competitive rate (use a comparison site to check current best buys).
Move money in via direct debit or lump sum, spreading across 2026/27 — or up to the full £20,000 if you have it.
After 5 April 2027, do the same with the smaller £12,000 cap.

For the £8,000-£12,000 "missing capacity" that you can no longer put into a Cash ISA from 2027/28 onwards, consider a Stocks & Shares ISA. Choosing between them depends on your time horizon — the Cash ISA vs Stocks & Shares ISA Calculator lets you compare both side by side with your own assumptions.

Action 2 — get comfortable with Stocks & Shares ISAs

The Treasury's policy bet is that under-65 savers, faced with a smaller Cash ISA, will move the marginal £8,000/year into Stocks & Shares. For some that will be the right answer. For others it won't.

The honest framing is time horizon:

Under 3 years: keep in cash. The variability of equity returns over short windows can leave you worse off at exactly the wrong moment.
3–7 years: judgement call. Cash gives certainty; equities give expected outperformance but with real drawdown risk.
7–10+ years: historically, global equities have outperformed cash savings on a real (inflation-adjusted) basis in the vast majority of rolling windows. The longer the horizon, the more the trade-off favours equities.

If you've not used a Stocks & Shares ISA before, the practical entry route looks like:

Open an account with a platform you trust (look at fees: a 0.25% platform charge plus 0.10% fund OCF is competitive; over 1% all-in is usually too high).
Pick a low-cost diversified fund as your default holding. A global index tracker (e.g. an MSCI World or FTSE All-World tracker) at 0.10–0.25% OCF is the textbook "starting point" for most savers.
Set up a monthly direct debit. Pound-cost averaging in over the year reduces timing risk.
Don't look at the daily price. Look at the balance every 6 months.

This isn't financial advice — it's the standard textbook pattern for moving from a Cash ISA mindset to a Stocks & Shares ISA mindset. Get personalised advice if you're moving significant sums for the first time.

Action 3 — review your non-ISA savings before April 2027

The savings interest tax rates outside the wrapper rise to 22% / 42% / 47% from April 2027. That's an extra 2 percentage points across all bands. The Personal Savings Allowance (£1,000 / £500 / £0) is unchanged in cash terms.

For a basic-rate payer with £30,000 of cash sitting in a 4% non-ISA savings account:

Interest: £1,200/year.
PSA covers the first £1,000.
Remaining £200 taxed at 22% (from April 2027) = £44/year.

That's a small absolute figure. But scale it up: £100,000 of cash at 4% earns £4,000 of interest, of which £3,000 is above the PSA. From April 2027, the tax on that £3,000 is £660 (22%) for a basic-rate payer or £1,260 (42%) for a higher-rate payer. Compared to last year, that's £60 / £60 / £60 more tax per £3,000 of taxable interest — and rising sharply at the higher bands.

If you have substantial non-ISA cash, the case for moving it inside the wrapper strengthens. The simplest planning move is "use this year's £20,000 Cash ISA allowance, then next year's £12,000". Over two tax years, that pulls £32,000 of cash inside the wrapper without changing your overall savings position.

Action 4 — don't ignore the alternatives

The Cash ISA cap cut doesn't only push you towards Stocks & Shares. Other tax-efficient cash homes still exist:

Premium Bonds. Returns are tax-free and capital is government-backed. Returns are below the better Cash ISA rates on average, but they're an additional tax-free home for cash you don't want exposed to equities. Up to £50,000 per person.

National Savings & Investments (NS&I) savings products outside Premium Bonds — some are tax-free, others aren't. Check current product specs.

Workplace and personal pensions for retirement money. Pension contributions get income tax relief at your marginal rate, which is more generous than the 25% LISA bonus for higher-rate payers. The trade-off: money is locked until age 57 (rising with normal minimum pension age).

Joint accounts with a spouse on a lower marginal rate. Interest earned on a joint account is treated as accruing 50/50 to each spouse. Using a non-tax-paying spouse's PSA and Personal Allowance can be a meaningful saving.

The Lifetime ISA Calculator, Junior ISA Calculator and Pension Calculator cover the main alternative wrappers.

What you don't need to do

Some myths to ignore:

You don't need to close your existing Cash ISA before April 2027. Existing balances are untouched. The £12,000 cap only restricts new contributions from 2027/28 onwards.
You don't need to consolidate your Cash ISAs. Multiple Cash ISAs in your name are fine. Each tax year's contributions are summed for the cap test, but balances can be held wherever and however many times.
You don't need to choose Cash or Stocks & Shares for the whole year. You can split the £20,000 in any proportion. From April 2027, the only constraint is that at least £8,000 must go to non-cash if you want to use the full allowance (and you're under 65).
You don't need to act today. The change is in April 2027. There's no incentive to make the moves before maxing your 2026/27 contributions.

The bottom line

The Cash ISA cap drops from £20,000 to £12,000 a year for under-65s from 6 April 2027. The overall ISA allowance stays at £20,000 — the difference must go into Stocks & Shares, Lifetime, or Innovative Finance ISAs. Existing balances and over-65 contributions are unchanged.

The practical action for the 2026/27 tax year is to make sure as much of your cash savings as possible is inside the wrapper before the cap cut bites. If you have meaningful cash sitting outside an ISA earning taxable interest, this is the year to fix that — especially given the parallel rise in savings interest tax rates from April 2027.

For projections, use the Cash ISA vs Stocks & Shares ISA Calculator to compare both wrappers, or the ISA Calculator for single-wrapper tax-free growth.

This article is for general guidance only and is not personalised financial advice. ISA rules and tax rates may change. For advice tailored to your situation, speak to an FCA-authorised financial adviser.